This morning at 9 AM Brian Moynihan spoke at the Barclays Capital Global Financial Services Conference.
(A summary of what he said is below.)
What we’re listening for: Moynihan and his top execs recently met in the bank’s headquarters in North Carolina to discuss layoffs (which might hit 40,000 in the U.S.) and other restructuring plans after Moynihan announced a major top management change. Employees heard about some of the firm’s future plans on Thursday.
Shareholders and the public should hear some similar announcements today. In particular, the firm’s new re-organisation plans, which sound like they include a renewed emphasis on small business, corporate, and international banking.
UPDATE: The call is over. Our live blog is below. Layoffs were not discussed in detail, but Moynihan said costs need to be cut, and that the company has acquired 200,000 employees in the past 5 years through deals. So in context, the projected 40,000 job cuts (BofA just released a statement saying that it’s actually 30,000 people who will be cut) doesn’t sound so high. He reiterated that the capital Bank of America has in reserve is plenty high in order to meet the Basel III requirements. And he spoke about the new company re-organisation, which is a consolidation of its 5 money-making businesses, and a move away from the 6th, which is not profitable: the mortgage business.
He also presented a glum outlook for the future of all financial firms, as Bank of America is dealing with the same issues that apply to the entire sector: a new capital environment, low interest rates for an extended period of time, and a slow global economy that is not improving.
9:00 — He’s beginning. Talking about BofA as a business. The one business that needs work he says, is the mortgage business. The low interest rate economy and preparing for the new capital regime, the slow global economy –> all of these are hurting BofA. The firm still has 4 other profitable businesses.
9:01 — He said he’ll talk about cost reductions later. The commercial side of the company has everything BofA needs, he says. The middle market franchise is the biggest in the country. The i-banking industry is #2 in the world in terms of fees
9:03 — All businesses but mortgages make money. Mortgages continue to hold the company’s progress back.
9:05 — Our capital tiet one ratios would be above 8.1% based on what we’ve accomplished in the third quarter, which is a fast recovery and better than we had in the second quarter
9:06 — Focus is on three core business (this refers to the new re-structuring and management changes he just made)
We are facing an unprecendented time of slow recovery. We face dealing with Countrywide and the new capital regime. So we’re thinking about how to deal with that
9:07 — In small business loans, they’ve done more than 20% more than last year.
9:09 — He’s chocking on his breath, saying that the ratio of funds and costs, the interest rate environment is ugly
9:12 – HEADCOUNT TALK — He’s said BofA has added tons of employees in past years (200,000 in past 5 years via mergers and acquisitions). We’re asked employees for help on how to restructure. He took 50 top people and put them on a team to look at revenue and streamline the company. We’ve made plans that have been approved now. (Those plans: layoff 30,000 in the consumer and small business banking, credit card, home loans, global tech and operations, and support areas.)
We’re at about $17.7 billion in costs per quarter, so we’ve been able to manage the costs, but – (he hasn’t really completed the but yet)
9:15 — He’s laid out a plan for how much the baseline cost restructuring via Project New BAC will cost. we’ll have the graphic in a sec Check out the cost break-down below.
9:18 — he’s going to talk about mortgages. 3 things- reps & warranties, litigation, new plans
9:21 — The reps & warranties exposure they have – they’ve paid $12 billion, have $18 billion in reserves to pay for it going forward. See more details in their slide below.
9:22 — litigation : the time frame for people to intervene was the end of august. it happened and it wasn’t unexpected. we’ve put $8.5 bil on the balance sheet for one settlement
9:24 — CAPITAL. Basel III . 6 3/4 – 7% is fully phased in. Above 8% on a reported basis. We’re well above basel levels of 3.5%.
9:27 — We have sufficient capital, we just have to keep making progress.
9:28 — We are on a customer-focused strategy. We’re taking out work that we don’t need to do anymore and moving it out of the company, we’re not compromising on customer-serving
9:29 — Question time!
9:30 — Has the bank learned from its mistakes and will it apply the same… that guy just got the mic taken away from him because he was talking about underwriting coal businesses. Immediately, someone yelled, CAN YOU TAKE THE MIC AWAY? He was booed off the mic and now some guy is asking about capital.
9:33 — We wanted to get out of some businesses because they’re subtracted from our capital ratios (this is likely about trading, for one)
9:34 — Negative impact from reductions? Getting rid of prop trading hurt revenue but it had to be done.
9:37 — Did the Fed direct you to raise capital in context of Buffett preferred? No.
9:37 – Would you bankrupt BofA? We wouldn’t discuss our plans. There are a ton of options we continue to work with.
9:39 — we’re looking at all options for Countrywide
The costs of Project new BAC:
Reps & Warranties exposure:
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