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00:00You have said that the economy is well on its way to being back. How far back are we. I read all the way. Do we have some distance yet to go. Oh David in a macro sense. First thank you for having me on. It's good to see you again in a macro sense. Most people predict the economy kind of crosses over the 19 where it was 19 before the pandemic. You know sometime in the third quarter type of things. And that's important to realize because then it's predicted to keep growing for the rest of this year. You know five six seven percent and next year five percent which is much different than it was at that size and 19. And so you know the challenges we've been fighting a war on a virus in society. We've we we are winning but it ebbs and flows. And if we can keep the virus under control I think you're hearing it never based commentary. We're set up for a strong growth rate for this year in the aggregate and strong next couple quarters. The economy is as big if the Fed is in the US is very accommodating central banks around the world and in next year's predicted to grow more. There are parts of the economy which are still crossing over. We said today that domestic flights booked on our credit cards are up 8 percent in the second quarter. But we said international flights are down 40 percent from 19. So yeah there's still pieces that are working its way through. But the unemployment rate's a little high. But overall the economy is in pretty good shape and predicted to grow. We just got to make sure it holds to this last year. Hopefully the last surge of the virus to these new variants. So you have a unique vantage point into the American economy because if you're business purely in the middle market you have so many customers so many consumer and commercial customers across the country. Do you see any potential headwinds. Do you see any potential risks right now to that recovery. But there are a couple of things. One is it's the vaccines the virus and the variance that's the key. So if we keep winning at War Hospital stay in great shape the treatment regimens keep coming on and then more and more people get vaccinated lowering the risk of serious sickness. That is all great news. That's the main one. But on top of that you're hearing our small business customers for example we surveyed them last fall. It's all about the virus you surveyed in the spring. Workers supply chains. And in that you hear more from people whether supports not being fully open whether it's the goods and services not coming out the rate as viruses resurge in some of the manufacturing places. And that's where you're seeing some of these temporary spikes in prices. And frankly just availability. So I think as we move to the fall in the United States in particular the biggest constraint other than frankly the the virus pathway itself is going to be the question of can't get people to do the work and can't get the goods to actually sell. And that's what we hear from our customers. They're worried about you know that it comes. Those are farming customers that can't get people to work in. And harvests are coming up. That's construction workers. That's truck drivers. It's all the above. And so we need to make sure that we get people back and mapped into jobs and get them the skills and continue to provide a great career for them but also help the economy grow. Right. As you know so well they're sort of a raging debate in this country now about inflation. Everybody agrees that it's here. It's coming. They don't agree on how long it's going to last. From your point of view are you seeing any indications of a slowdown in economic activity because of higher prices. Do you see some of your customers for example pulling back because of inflation. No not not from a stamp. You don't see em pulling back yet. That's the operative question. Operative word is yet. And so right now you're seeing consumer spending rose in the second quarter at a faster growth rate in a record aggregate amount compared to the second quarter of 19 not 20 but 19. So it's basically 20 percent higher was plus a 19 which means 10 percent for two years. So that's a big amount. Growing faster record levels. So people are spending money so prices aren't affected yet. Now when you go look at our auto dealers they can't get cars to sell. So they're draw rate. And airlines is a low level. You aren't financing your inventory because you just can't get cars to sell. That's why you see all the ads and used car prices are going up that will have an impact on people over time. But the belief is that's transitory and will come back out once the supply chain for new cars gets done. And when people buy a new car there comes an old car remember. Used cars are two or three times the sales levels of new cars in nine states. So there is a part of this that just needs some work to get through the system. What's the chip shortage of some of the other shortages. But right now it's probably pretty much temporary but it is there. It's not like it's mysterious whether inflation can occur. You can see the numbers today. The question is in six months or a year from now where the expectation is that it will keep going as opposed to people who use that. Wages have risen. Price have risen. People can pay it. It's not and it's not slowing down their behavior. Precise point but that's not even the most important thing. Now it's actually over the next six months. Think of what prices your colleague just talked about the prices going down. If you're a month or two ago we're talking about outrageous wood prices and now you're talking about him having come down. So I think it's that's the debate of these things transitory or not. But it'll be six and 12 months ahead as the Fed sees it. They may stop some accommodation before that but that's what they want to see is that fundamental expectation inflation stays high enough but not too high. So so that is the question we believe many people believe inflation is transitory. Others disagree with that. What about these record lows rates. And for that matter stimulus in terms of bond buying by the Fed Reserve. That must surely be transitory. What kind of period are you expecting in terms of when they start pulling back on that monetary stimulus. Our research team has the you know the bond buying kind of starting to move away in a lot of part of this year and early next year and rate moves really later past that. My guess is they'll be moving out. And based on some of the data that you're seeing come out earnings reports and an activity again assuming the virus doesn't move. But you know I think the market made a big step of moving in the rates based on the last sort of Fed input and Fed results. And but I think you know the market's going to ebb and flow based on what the data they're seeing. And so our belief is frankly that the economic conditions are such that it would be that the Fed needs to be accommodative to assure the war on the virus is one and that that's when six percent unemployment gets to 4 percent. When you have wage and prices have risen but then if slow back you have have risen in a fundamental way that they know there's not deflation ahead or a problem of demand then no they'll start moving. The expectation is the first any move on not the expectation. That decision is the first to move on his balance sheet NASDAQ team would say and a year early next year. So Brian you announce earnings for Bank of America today. And certainly some of that recovery in the economy was expressed in your earnings. You have nine point two billion dollars of profit in the second quarter. Pretty nice big number I must say. At the same time you have consumers were really strong. They had a lot of cash on hand but you don't have loan growth. Is there anything that you brought Bank of American can do to stimulate loan growth or do you just have to write it out and hope it comes back. Well the way the way we there has to be loan demand to get loan growth and it going back to consumers say credit card balances. What happened is consumers got a lot of money through the stimulus. They quit spending money and that gave them money to pay down the card balances. We had just as many cards today as we had two years ago and we have 25 billion dollars less than balances. But they started building up again in the second quarter. The commercial loans are the same thing. We have just as many more clients now than we had two years ago. But the draw rate on loans was 41 percent then and 31 percent now. That's 40 billion dollars. But they started to draw more and they started to do more in the months of the last quarter. And so in each month got bigger. Business banking which is five to 15 companies started to finally grow. Are small businesses producing more lines of credit and more credit originations than it did 19. Those are signs that you're seeing a loan growth come in and a period you saw us grow loans by 15 billion even with the BPP runoff. And that's good news. Now we got to see that. Just keep compounding backup if you go back about two years. You know we were nine hundred and seventy loan a nine and an 80 billion dollars loans were at nine hundred and fifty nine and twenty now. So we've got some room to go just to get back to where we were. But it's going to come down to customer demand that way if banks stimulate credit is to make credit too available and then they don't like it after. So you have to stick to your responsible growth and do it the right way. And that's what this industry frankly the whole industry has done. And we've been a leader in the industry. Our charge off rate today was the lowest it's been for 25 years. And a company was called Nation's Bank. And that's how far it goes back to where at the last time we had a 27 basis point charge of free loan growth is returning. And as you say it depends on what happens for the rest of the year. But let's assume it stays in the path it is right now. Where does that put. Bank of America at the end of the year on loan growth. But we should we should pick up the economy normalizes we always say we should outgrow the economy because of getting market share by one or two percent. The problem we have a recovering economy it's growing faster. So you have you analyze the 15 billion it's 2 percent. You can see the number there. We'll see it. But we we expect mid single digit long growth and more normalized times. And again that all depends. You know there's some respect that we've got to make sure the economies stay open the businesses stay open and frankly the people that supply chain of things and people gets get straight and continues to improve which every expectation is that people thought it was bad two months ago. Feel a little better now. We're seeing it get incrementally better but is still challenging. So that's loan growth. Let's talk about trading because trading I think the way I read it was of a mixed bag. On the one hand fixed income disappointed some people. You're trading performances and caught on the other end equities sort of shot the lights out I think was like 33 to 34 percent up. Let me start with that one. What did you do to get that result. The team the team under Sophia and Jimmy have done a great job in the trading area continue to gain market share with clients using a little more balance sheet constructively to help those clients. And it's some of the prime brokerage areas and stuff that they've just done a great job. And so we are up higher than the peers so far and we'll see what happens as the rest and report on equities. And we are kind of in the same ballpark. 38 percent down on fixed income but we run this business to be consistent across time. Twenty one first half bigger than 19 first half. Twenty one first half sort of. That's a Mets it was last year first half. So we're trying to run this thing in the long run just to keep making money making money making money. We didn't lose any money on any trading day last quarter. You know Tom Montag and a team do a great job. And it's just you just grind it out and we help clients and we make some money into not pushing too hard. So you have to pull it back and you know other people go different ways. But that's our philosophy. We are fundamentally building that business up a little because a market share has been growing. And frankly it shrank as a part of the company's size because the rest the company grew and now we're getting it back into orientation that helps you optimize the capital and other things. Brian you mentioned prime brokerage that's gotten a lot of press recently because of some other big banks who've gotten their fingers burned. I think it's fair to say. How much did Bank of America benefit. Because some other people had to pull back and prime brokerage. Soon we did I don't have any specific statistic but it's a hard business and you gotta know how to do it and a team does a great job and a risk team supporting them. Jeff Green and the team do a great job. And so we feel very comfortable and in truth and it proves out. But it's it's a it's not an easy business. And you got a lot of technology a lot of risk capabilities and you got to have very good people running. Brian in your earning statement you called out particularly Asia as really helping an awful lot in your equities trading business. This last quarter give us a sense of Asia and the exposure there because there is some controversy over in Asia as well. How exposed is Bank of America over when it comes to equity trading in Asia. What were the. Well the controversy is the contrary. Verse has effect as you know we have Japan and we have Hong Kong and then we have mainland. And it's not a it's not a huge part of this is just had a nice. It grew nicely last quarter. That's why I was called out. It's in the low twenty five percent of the business around numbers. But it's. But you gotta remember there's different parts of what we call Asia that you know that are part of that controversy over the Hong Kong team does a great job. We have a more limited base business of serving large companies and cash management on mainland China in Hong Kong. Obviously we have equity trading and things like that. And it's it's been doing fine. Yeah Hong Kong has been in the news just every single day here. You mean any possible changes in how you operate in Hong Kong because of the controversy. Not yet. We'll see that team team does a good job. Yeah. We deal with the virus and everything else. But obviously there you know we'll keep it. We obviously keep our eyes close to the ground. Ears close to the ground to hear things and make sure our team is as taken care of and doing the business and being safe and everything. And we'll see. But it's in the operating countries around the world is always interesting. And it will be some other country someday. We'll have the same conversation about. And our job is to actually support our clients and do a great job for them. Brian in the investment bank I noticed in the earnings call. I think you had the third highest quarter ever on your investment bank revenue. At the same time some of your advisory fees were sort of flat where some others were really going well because there's a lot of money going on as we know a lot of mergers and acquisitions. I do feel comfortable that Bank of America is fully competitive when it comes to mergers and acquisition fees. Yeah well you know you have to think about investment banking as a broad set of capabilities. Debt financing equity for equity raising an MBA MBA is generally the smallest portion of the three. And we we tend to have always been dominant in some of the debt underwriting and very strong and the equity underwriting. So our MBNA never looks as big. But we had two billion dollars of fees. It was the third highest quarter ever. It missed the second by seven million. The highest was the first quarter this year. Matthew Cutter and team have done a great job. And so while other people may have more MFA fees you know we had better debt financing fees as a percentage and it'll be it's our clients and what they're doing. And sometimes you're in them in a flow and sometimes not sometimes in the financing flow as part of the MBA and not the MBA fee but all things being equal. The team's done a great job under Matt's leadership. One of the key roles that I've learned over the years of a CEO is allocation of capital. You have a fair amount of capital to work with right now. Bank of America. Give us your sense how you're approaching the question of paying dividends. You've had a policy I think about a 30 percent cap. So your dividends are you re-evaluating that. How are you deploying your capital now. Well we announced a few weeks ago after the C car test for this year that we were going to raise the dividend by 17 percent from 18 to 21 cents a quarter. The board hasn't has to prove that we're going to recommend the board and they approve it formally at their next meeting. And now after starting July 1st after that we can now buy stock back not based on the constraints that were in place before which was four quarters trailing income. Take out your dividends. And so we believe that 70 30 split and we're moving a dividend up and then know we're buying a lot of stock back because we have we have 20 basis points of capital over the minimums. And it was it was capital return interrupted by the pandemic. We shut down for a couple of quarters and then we finally got into it. But by then you're using your average forecast as earnings and the earnings were building back up and we put the reserves up. And so it was a constraint. And so I think we bought four billion stock back last quarter. You should expect it to be more this quarter because we've come through the crisis and we just have more capital than we need. And part of the way that we do is we take care of our clients needs and we make sure we serve those. We spend the money on what we need to spend the money on. And then after that we Bruce income and net income all goes back to the shareholder. And then the capital that built up from earlier income that we couldn't get back is going back soon. In the earnings call that your CFO actually said something interesting saying we are we are not a hedge fund. That never occurred to me. You were a hedge fund. But but are you investing in other securities besides buying back your own stock. How are you deploying that cash that you're keeping in your reserve. What. What. He said it. There's actually a time period 15 20 years ago in his company if somebody accused it the CFO being a hedge fund. What we mean by that is look we generate deposits from core transaction accounts and core relationships with customers. We don't have hot money. We don't raise money by deposit pricing. Our deposit rate paid a few basis points literally. So those core deposits then are because we have great client relationships and you have to turn around do something. There is a trillion nine a deposit. There's 900 billion dollars of loans. That's a trillion dollars different. That's got to be put to work. And so what we do is we put it to work to extract the value those deposits for our shareholders because that's the way you get paid for deposit relationships is to invest and invest in treasuries or invest in mortgage backed securities. No credit risk in the debate. The debate is do you time it or try to do things. No. We just constantly invest when we're assured in a world where you had massive liquidity hit the market when you're sure that those deposits are attached to real customers are going to stick with you. You start to deploy. It worked upon that offer and a team have done and your magazine our treasurer and others is over. The last three quarters are in ISE. How flat. And we call it a bottom last year third quarter that people didn't think we could because of the asset sensitivity company. And it's been true. And it will start to grow now as loans grow and continued deposit growth. But we invested some of that capital to start to get the value those deposits. If we vest some floating some fixed etc.. But you know there's a lot of complexity but they've done a good job of starting to extract those deposits. Meanwhile we have another 100 billion dollars of deposits like quarter growth. And so you've got to put more money to work. Brian let me turn to something that I know is near and dear to your heart and that's that your digital efforts your digital business. And you're putting up some really big numbers in terms of the number of digital clients number of transactions all those things. But make some news for us here today. What's the thing we don't know about about the digital operations of Bank America that we should know. But yet one of the ways to have to see how the digital is part of the high touch high tech attack it's a people get focused on mobile digital mobile active customers are digital active customers. We have lots of those 45 million. We're number one ranked in those things. That's all good. But what you forget is it's tied to how you build out the franchise. So if I were talking to you six seven years ago I would've told you that a top 30 market United States was half the population. We weren't in seven of them. And we were number one two or three and the other twenty three today. Well one two three and 25 markets. So we've improved on some of the markets. So we weren't one or two. And we did that through digital and deploying the branches. So what's interesting is regaining market share by using digital led execution. So in Pittsburgh we had tens of thousands of checking accounts that signed up was before we ever opened the branch. Same thing. And in some of the place Ohio. So that digital allows us to expand our branch franchise much more efficiently. And so we have 43 hundred and forty two hundred some branches today. We have a trillion dollars deposits in the consumer business alone. And another two or three hundred billion in a in a in a. Yes. Wealth manager business and also the middle market stuff which depend on that branch structure. It is the most efficient rate system. It's 20 percent smaller than a lot of people. It has more deposits. That is because it digital allows you to do that but also allows you go attack markets. And that's why we opened Lexington in Cleveland Columbus Cincinnati Indianapolis Denver Minneapolis Pittsburgh. And we just keep putting these out there and we can do it with our combined digital efforts. High touch high tech. That's the interesting thing. So yes you get more digital sales. Yes you get more activity. And the other big thing beyond just the attack you can do with it is it also goes across the platform. So you saw the amount of digital engagement go up by wealth management business go up a lot because the necessity is a pandemic and that's holding and growing faster as we're entering the face to face meetings. Same with the commercial businesses. So this this this is providing a capability for us to just grow from. And the digital customers interact at almost a billion times in the consumer business last month alone. Just think about how much they're looking at us and interacting with them and doing it. That's that's bringing quality. That's why our customer scores are the highest they've ever been. Our brand is our highest ever been in the middle of a pin down extraordinary extruder. Despite all the digital is done for us they're returned to the office is a big topic for all the big banks. I know you said September's a goal. You said you want people back were vaccinated. To what extent are you getting information from all your employees about whether they're vaccinated. Are they resisting even giving that information. It's. We ask people starting a few months ago low the vaccine to upload your card. And because we need it that proved to be able to plan. And so we have about 75000 U.S. teammates of loaded in about twelve or fourteen thousand outside the United States. And so we're grinding away every day in another five hundred thousand five hundred or a thousand fifteen hundred. You are starting the vaccine process going see an initiated because they start to load and then once completed it. So you're just doing it. But that's that's like 50000 people. We have to move four more from home to the office. So we're basically busy right now. So we've said July August and September gave me a total of say pick which month you want to come back. They're picking at some some coming back immediately. And we had a town hall today in person with people. It was it was wonderful to see some of my colleagues a little I haven't seen since the February March of last year. And they saw each other. And so we're trying to get the people back. But we're also 10 of the summer that people may have made arrangements to work someplace and we can't pull the rug out from. So we're letting it work and we're getting them back. And then after September 8th of September 9th the balance comes back. And by the way between now and then we'll have another think about each week if a few thousand. We've got to again arrange for them to come back. And it's it's a complex task. But the people are coming and are happy. They'd like it. They're doing it. And we're open. The buildings our mail offices are gonna be open by the end of month pretty much fully private bank offices consumer the commercial banking offices our branches are basically up to the staff after the number levels will have come out of the pandemic. And so it's all good. That's helping downtowns. I'm here in Charlotte today. And you know we need the people to get downtown to keep the restaurants and businesses going. And if they're vaccinated it's time. Know we're telling them come in and let's get started. Ryan one more hot topic right now is the banks and that is the reported burnout out some of the junior bankers. You've already said that you're increasing the compensation presuming your analysts and your vice presidents. Are you having trouble retaining people were taking some of the junior talent. No. No not really. It's our turn right. A cup is basically what it's been traditionally. It's about these kids coming out of college working for us. Yeah. They got a lot of talented kids especially on the investment banking. And it's a lot offers from private equity and other things that we're training for our clients. And that's okay too. But we just had to keep adding people and you get busy and then the work comes. And so we've tried to keep our teammates know keep the keep level balanced stay mentally healthy stay physically healthy. And we think getting them back to work actually is a major part of that. So we're starting to bring those colleagues back. If you think about it we have an investment banking and trading. And more broadly in a company you know a class from 19 it was in the office for maybe five or six months a class of 20. It was never an office. A new class coming in. An intern was last year but hasn't ever met their boss. And so we're doing it. And here they come. And they're town of kids. And yet some will find jobs elsewhere. But we've also told them you've got a career here. Bank of America. Don't worry about going back to business school if you wanted. That's fine. You want to stay with work which you want to work in different part of company. So we're just basically saying this is a heavily touted 50 percent diverse candidates. Great group of kids from the great schools come in enjoy the company and learn. But frankly we've got to get the culture wrapped around them getting a chance to see each other. And some of the informality of that is just really tremendous. And it's not been able to be had because the frankly because of the pandemic and now we're reversing that out. There's a fair amount of talk and yes writing indeed about whether this pandemic can really change the relationship of the employees with employers. A lot of people are saying you know what. I've had a new site about my career. I'm not going to go back to my old job. Do you find that you've weakened Dani Burger bonds between you and your employees because the pandemic is because they've gone off to other things had different experiences. I just I just told our teammates we take a survey every year. David and we just had results from one hundred and ninety thousand people filled out the survey and they that last year they went to an all time high. This year they are higher than they are 18. And they're not quite as high as last year because that was a number they think it had to do with just the world we were in. Think of me in 2020. So we went from 85 to 88 across from 19 to 21 which you know that's what people are telling us now. Are they interested in having a dialogue and trying to understand the dynamics they've learned about commuting lights. And is there flexibility about I can work some days in this office some days in that office because I live someplace sick of New York. You know we've got Stanford. We got we had Hopewell we got Jersey City we've got Red Bank and the ideas. Maybe I don't come to that island Manhattan. If I'm not that's not a job requirement. But we'll figure all that out. The first thing is get people back and get him into the office and get him used to see each other and then say OK what. Let's talk about what you need to do or what you wanna do. Meanwhile if they have children we have backup child care and we have child care benefits. Meanwhile if they have you know other things that we've had arrangements for people to work part time full time flex time any office at the office for years. And then are our sales teams go out see clients all times. There are always other offices. It's going to be a very different set answer for their different groups of people based on the business needs and the teammates needs. But we we just got the survey results very pleased with them. And second high score we ever got in higher than any score by a lot. And five seven years ago. And so the team must feel pretty good. But we always are working on making make it all work better for us. You're always working. But just very briefly at the end Brian what do you think is the number one thing you did to create that kind of loyalty. It's the team that works with me. We have fantastic people and we try to take an employee centric customer centric view. The benefits the things we do. But it's really just about giving them a chance to do more here than they do otherwise. Okay.

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BofA CEO Moynihan on Economy, Loan Growth, Return to Office

Bank of America Chairman and CEO Brian Moynihan discusses the state of the U.S. economy, the bank's strategy and the return of employees to offices after the pandemic. He speaks with Bloomberg's David Westin on "Bloomberg Markets: The Close." (Source: Bloomberg)

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