Based on the live blog of the Wall Street Journal for the conference call of Bank Of America CEO Brian Moynihan held by Bruce Berkowitz of Fairholme Capital Management, here are some main points:
Bank of America is 1) focusing on its core business, and the core franchise is growing market share. 2) The bank is selling assets that it doesn’t need. 3) The capital level is more than sufficient, even after taking $20 billion in charges and payments to cover various mortgage sins in the second quarter. 4) BofA is cleaning up bad mortgages, and continuing to lower risk at the company.
Moynihan said there are many bad signals in the economy right now; the credit demand would continue to be slow. The economic recovery is “steady but grinding”. This is not like 2008, the fundamentals of the economy are much better.
"Obviously there aren't many days when I get up and think positively about the Countrywide transaction," Moynihan referred to the 2008 deal for Countrywide. But he says the bank is working through its bad mortgages and "the risk has been lowered" over time.
Moynihan insisted on the point that BofA doesn’t need more equity. It will meet the regulatory capital requirements by selling assets and from earnings generated without raising new money. The predicted annual pre-tax for BofA , pre-provision income is around $45 billion to $50 billion. BofA has reported $8.5 billion to $9 billion in pre-tax income last quarter, minus a grab bag of mortgage-related charges and settlements.
The bank admitted it won’t raise its penny a share dividend this year, need the approval from the regulators. The expectation for capital return has to be very modest before the bank meets new capital requirements. Currently, the capital builds on the bank’s book and won’t be put to risk.
Berkowitz asked why aren’t more bank’s executives buying stocks if it’s very cheap? “My entire net worth is in this company”, or nearly all of it, Moynihan answered. Many executives including him got paid in stocks. With all the volatility in the market, the bank’s executives have to make sure they can buy the stock legally.
The live blog in WSJ can be found here.
Bank of America is 1) focusing on its core business, and the core franchise is growing market share. 2) The bank is selling assets that it doesn’t need. 3) The capital level is more than sufficient, even after taking $20 billion in charges and payments to cover various mortgage sins in the second quarter. 4) BofA is cleaning up bad mortgages, and continuing to lower risk at the company.
Moynihan said there are many bad signals in the economy right now; the credit demand would continue to be slow. The economic recovery is “steady but grinding”. This is not like 2008, the fundamentals of the economy are much better.
"Obviously there aren't many days when I get up and think positively about the Countrywide transaction," Moynihan referred to the 2008 deal for Countrywide. But he says the bank is working through its bad mortgages and "the risk has been lowered" over time.
Moynihan insisted on the point that BofA doesn’t need more equity. It will meet the regulatory capital requirements by selling assets and from earnings generated without raising new money. The predicted annual pre-tax for BofA , pre-provision income is around $45 billion to $50 billion. BofA has reported $8.5 billion to $9 billion in pre-tax income last quarter, minus a grab bag of mortgage-related charges and settlements.
The bank admitted it won’t raise its penny a share dividend this year, need the approval from the regulators. The expectation for capital return has to be very modest before the bank meets new capital requirements. Currently, the capital builds on the bank’s book and won’t be put to risk.
Berkowitz asked why aren’t more bank’s executives buying stocks if it’s very cheap? “My entire net worth is in this company”, or nearly all of it, Moynihan answered. Many executives including him got paid in stocks. With all the volatility in the market, the bank’s executives have to make sure they can buy the stock legally.
The live blog in WSJ can be found here.
