Bank of America CEO Brian Moynihan thinks the U.S. economy will avoid a recession.
“The debate is whether GDP [gross domestic product] growth flattens out at 2% or goes lower,” Moynihan said in a recent interview with Barron’s. “Everything we see in our customer base is consistent with a slowdown to 2% and a flattening out from there,”
U.S. GDP expanded at a 3.1% rate, adjusted for inflation, in the first quarter, and is expected to slow to less than 2% in the current quarter.
Moynihan, outlined what the bank means by its mantra of “responsible growth.” In part, it involves making consumer loans directly to customers and not buying them in the wholesale market, as rivals such as JPMorgan Chase (ticker: JPM) do. “We look every mortgage customer in the eye,” Moynihan said.
Bank of America (BAC) has been willing to tolerate market-share declines in the mortgage market since the financial crisis to operate in what Moynihan believes is a more responsible fashion. That approach might limit losses in the next economic downturn and avoid the costly legal and regulatory problems that the bank faced after the 2008 crisis.
Bank of America is the country’s leading consumer bank. The bank sees an opportunity to expand its market share in consumer loans among banking and wealth-management customers who go elsewhere for them.
To Moynihan, responsible growth also means offering consumers no-fee checking accounts if they have a monthly direct deposit of more than $250—with an option to avoid any overdraft fees. He said that the bank has a million SafeBalance accounts that don’t have overdraft fees, something of particular appeal among college students.
Moynihan, 59, has won praise for his role in turning around Bank of America in his nine years as CEO. The bank has gone from being unprofitable in 2010 after a series of charges to earning $28 billion in 2018. The stock has nearly doubled to $28 under his tenure, although it remains at just over half its 2006 peak of $53.
Berkshire Hathaway (BRK,A) CEO Warren Buffett has said Moynihan is the most “underestimated” of major bank CEOs while Wells Fargo analyst Mike Mayo has likened him to Baltimore Orioles Hall of Famer Cal Ripken Jr. because of his dedication and determination. Mayo contrasted Moynihan with the Babe Ruth of bank CEOs, JPMorgan Chase boss Jamie Dimon.
“He’s the opposite of Babe Ruth who points to the outfield and hits a home run. He’s like Cal Ripken grinding it out every day. Bank of America is a machine and churns out consistently improving earnings and returns,” Mayo said.
Moynihan’s tenure hasn’t been perfect. One decision he might want back was issuing $5 billion of preferred stock in 2011 to Berkshire that converted into Bank of America common stock at $7 a share. With the stock at $28, that has cost the bank about $15 billion. At that time, the bank felt it was worth giving Berkshire a sweet deal to get Buffett’s support.
Moynihan often highlights the benefits enjoyed by Bank of America’s employees, or “teammates,” as he calls them. These include a minimum starting salary of $35,000 annually or $17 an hour, rising to $20 an hour in 2021. He also cites 16 weeks of family leave after the birth or adoption of a child, while noting that 40% of those taking that benefit are male.Asked about Democratic presidential candidate Bernie Sanders’ comment that workers deserve representation on Walmart ’s (WMT) board, Moynihan said that’s not needed at his bank. “Teammates can talk to me every day,” he said, noting that he looks at thousands of employee emails each year. “Any teammate can be heard.”
