“We’re doing the right thing,” Moynihan said yesterday during an interview with CNBC. While the bank may sell some businesses to boost capital, Merrill Lynch units won’t be among them because they’re too important to customers, he said.
Moynihan, 51, assured employees of the Charlotte, North Carolina-based company in an Aug. 8 memo that the firm is sound and getting control of mortgage costs after shares of the lender plunged 20 percent. While Moynihan has said there’s no need to raise capital, analysts including Mike Mayo at Credit Agricole Securities USA say the idea can’t be ruled out.
CNBC anchor Maria Bartiromo listed a series of mistakes Moynihan made this year, including raising expectations for a dividend boost and “grossly underestimating” costs tied to defective mortgages. She said that the “market is not believing you” when Moynihan says Bank of America doesn’t need capital, and asked the CEO how he would rebuild credibility.
“We will get it back by continuing to do what we’re doing,” Moynihan responded. “Driving our customer-driven business, continuing to perform in the market.”
Bank of America advanced 17 percent to $7.60 yesterday in New York Stock Exchange composite trading, its best one-day showing since May 2009, recouping some losses from the day before.
Fixing ‘Mortgage Mess’
Bank of America is “moving the mortgage mess behind us” with settlements including an $8.5 billion deal with institutional investors announced in June, Moynihan said. The firm also sold mortgage-servicing rights last week, he said.
Servicing involves billing and collections on home loans and handling foreclosures when borrowers don’t pay. Owning the rights became less profitable as more homeowners fell behind on payments to Bank of America, the largest U.S. servicer.
Moynihan cited an increase in deposits and said the firm has more capital and reserves to withstand a downturn “than any other time in our history.”
The firm isn’t “even going to ask” regulators for permission to raise its 1-cent quarterly dividend for the time being, as the economy has deteriorated, Moynihan said. Earlier in the year, the Federal Reserve rejected the bank’s request for a “modest” increase to the firm’s payout.
Moynihan is scheduled to speak at 1 p.m. New York time today in a public question-and-answer conference call hosted by mutual fund manager Bruce Berkowitz, whose Fairholme Capital Management LLC held 92.6 million Bank of America shares as of March 31. Berkowitz has promised to put the “toughest questions” about the bank’s situation to Moynihan.
“The most important point to keep in mind is that our company remains financially strong -- in particular, much stronger than we were either during or coming out of the economic downturn of 2008-9,” Moynihan said in his Aug. 8 memo. “Most of the factors driving market volatility are beyond our control. But for matters within our control, we are taking action.”
To contact the reporter on this story: Hugh Son in New York at firstname.lastname@example.org