Bank of America President/CEO, Brian Moynihan joined Bloomberg Television's Erik Schatzker and Stephanie Ruhle today live from Davos and said trading operations were profitable almost every day last quarter as the lender helped clients adjust to the prospect of higher interest rates, "I think we made money on every trading day except for two or three. Quarter after quarter, that's been trust. It's because it's a client business." Moynihan also said:
- U.S. Economy has growth through 'Fundamental' ways
- Believes worst of mortgage issue behind Bank of America
- 'Uncertainties' still exist, still talking to DOJ
- Sees 'underlying business' making progress at Bank of America, "As we continue the compliance and risk infrastructure that we've been building on and investing in heavily, I think you won't find those types of things repeats but we are still in the process of cleaning it up."
- Bank of America has retained talent it needs to succeed
- Investment banking fees grew 'nicely' last quarter
- Opportunity to manage through the tapering of quantitative easing:
To follow Bloomberg's coverage of Davos: http://www.bloomberg.com/davos/
Moynihan on why it is important for bankers to attend Davos:
"Number one we come to learn. Because if you think about the range of topics that are talked about, the range of information you can gather from all the different participants, you come to learn and as CEOs we always have to learn. Learn about what is going on in a particular country and in a particular industry. It is important. The other thing uniquely for banking, it's the chance for all the CEOs of the institutions across the world to sit together in a room with policymakers and others and have a dialogue. The dialogue has changed over the four or five years. That is very important. The third, obviously, is the clients. And seeing our clients and seeing what's interesting to them and it is chance to convene and see a lot of people in a relative short period of time. "
On whether the conversation among Bank CEOs will be about income inequality and that Bankers are the least popular people in the room right now:
"That's the dichotomy of why we are here. We are looking at a recovery in the banking industry but we a society obligation to drive. In the United States, we engage in everything we do, our small business lending is up 25 percent year-over-year. Our mortgage lending was up until revise trend off. Our credit cards are up. We are trying to participate in the economy, but the economy has to grow in fundamental ways and the banks are trying to help it. You have both of those issues. Industries are cover, capital letters and liquidity. Every one of us has work to do. On the other hand, we talk a lot about the role in the fundamental economies and we help growth and how we support both idea exchange and other information."
On the perception problem that Banks continue to have that 'Bankers lack respect':
"In our company, we really focused on trying to do everything correctly for the right way for the right reasons and so we started on a journey that you and I have talk about many times - four or five years ago, to start to simplify the company. If you sit down and say, what is the purpose of the financial institution, it is to help our clients live their lives. We've done everything we can to narrow the framework of the business. As we continue the compliance and risk infrastructure we have been building on and investing heavily, you will not find those types of a repeat but we are in the process of heating it up here"
On whether the worst of the mortgage litigation is behind Bank of America:
"Yes. Because we are the biggest and the country-wide acquisition we were deep into this early on, for example with Fannie Mae and Freddie Mac, we settled, through with them. With the private label litigation we did that 2.5 years ago. There is a lot to be done. There is still uncertainties, we have investigations by the Department of Justice and we deal with those as they come up. But the reality is, what we were able to and really had to do to clean up the balance sheet up and take the uncertainty around the company away starting in 2010 and 2011 we did a lot of work and it cost us a lot of money. Some of the numbers people talk about, we have spent."
On what 'inning' Bank of America is in:
"You look at fundamental cases and what we settled and closed off and look at the various pieces of liability, we have done a lot of work. But it cost a lot of money. But we built the best capital ratios in the U.S. industry. Our tangible common equity ratio is over seven percent last quarter. More importantly during all that, and that is the thing that is sometimes hard to keep people focused on, is the underlying is this making progress. Whether it is the market share in investment banking, whether it is our market share in cars, whether it is our consumer market share, we have been driving that. Now a couple years ago, we talked about a backpack and carry all the weight. As the weight gets lighter, we should spring ahead."
On the similarities between BofA and JPMorgan having to write out big checks:
"The similarities between companies have to be sorted out by case-by-case. Gary Lynch and team have been working this and we have a lot of experience. You have to take it apart, case-by-case and brick-by-brick and we still have work to do. But if you look at the put back risk, you talked a lot about that. We largely settled out substantial parts of that."
On how Bank of America is satisfying their top clients:
"Look at our market position, our talent and capabilities, we have very different businesses and very different compensation scheme and always have. We always own the businesses. Nothing new. Whether it is financial or investment bankers, we have maintained the talent to drive the growth.. It is what we get paid to do. "
On what it will take to correct Bank of America's valuation disparity:
"If you look inn 2012, we had 100 percent plus returns. 2013 35 percent or whatever it was. 9 percent plus year to date and this is on a big market cap so these are large amounts of movement. In the end of the day when the street looks out without people estimate, it is getting to that normal earned capacity. We need to earn back to the normalized earning level we talked about. Each year, as we put more things behind us, you will see the discount come down. A lot of it has come down but you will see it come down as we make the earnings number more what we're supposed to earn"
On where Bank of America's the growth area is in 2014:
"In a businesslike mass-market consumer, general retail business that is tougher. If you look at what we did there we managed to expense base carefully. If you look at investment banking fees, those grew nicely over year, the last quarter was one of a record high levels. If you look at our wealth management space it's at record revenues and record profit margins. We look across all businesses. There is always ebbs and flows. The trading business is more muted. If you look at the consumer businesses, they have been doubling their income over the past couple of quarters."
On how tough will it be to manage through the tapering of quantitative easing:
"It is an opportunity, but we saw a pretty substantial move in rates. Some of the experts will talk about that, to go... it is a doubling of rates since late last summer. People are anticipating what the Fed will do... but our job is to be in the middle and help people find liquidity. In the fourth quarter, we made money on every trading day except two or three. You go back and that has been true. It is a client business. You have got proprietary trading. Activity that is what you see in flows."