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Moynihan: BofA getting through mortgage issues, growing faster than its peers

By Andrew Dunn and Deon Roberts
adunn@charlotteobserver.com
moynihan1210
T. Ortega Gaines - ogaines@charlotteobserver.com
Bank of America CEO Brian Moynihan

Bank of America CEO Brian Moynihan says the Charlotte bank has gotten through “the lion’s share” of its mortgage issues and is now growing at a faster rate than its peers.

The progress comes amid an economy still weighed down by fiscal uncertainty amid wrangling in Washington, with small and mid-sized businesses often hesitant to expand, he said.

And while Bank of America still has more work to do from the troubles stemming from its 2008 acquisition of subprime lender Countrywide Financial Corp., Moynihan says, he believes things are looking up. Shares in the bank are up 34 percent this year.

The companywide cost-cutting program that included tens of thousands of job cuts across the bank is nearing completion, he says, though staying efficient will be a “constant challenge.”

The Observer sat down with Moynihan for a half-hour discussion of the bank’s legal issues, federal regulations, the bank’s share price and where Bank of America goes from here. Charles Bowman, the bank’s Charlotte market president, also sat in and talked about how changes at the bank are playing out locally.

Questions and answers have been edited for space and clarity. Answers are Moynihan’s unless noted as Bowman’s.

Q: When you were here in May at the shareholder meeting, you and board chairman Chad Holliday said the “train was on the tracks” and Bank of America was ready to move forward. Still, it seems everyone’s been waiting for the bank to get over the hump. What’s left to be done?

A. To continue to work through the mortgage litigation and the cost of mortgages, which is coming down every quarter. We took a lot in 2011 when we settled some of the big cases, and we took a lot less than that, but still a lot, in 2012 and less this year and it’s going to work its way down.

The other thing was to get stability of revenue at the company in good shape. And we’ve done that. You’ve seen revenues of the company basically stabilize and grow. What you’ve seen in the course of this year is, relative to our peers, we’re growing faster and now we’re catching them. That’s why the stock has performed well and earnings have come up actually.

Q: There has continued to be a steady drip, drip, drip of legal settlements over the past year. Do you feel that they have chipped away at the bank’s reputation?

A. The issue was that we ended up with a portfolio of mortgage loans that were difficult to collect. I think that was more difficult to deal with, with the general American consumer, because we had a responsibility for the investors on those mortgage loans, which wasn’t us, to collect them. We’ve been able to get through the lion’s share of that. That’s why you’re seeing our brand scores continue to come up.

We still have work to go there. But we’ve modified 2 million loans now, we’ve continued to do everything we can to avoid foreclosure. By the way, we’re not alone in that. All the banks are in the same position.

Q: Last month, the chief financial officer of JPMorgan Chase called the regulatory environment “ highly charged and very volatile.” Do you agree?

A. The regulatory environment is still getting finished, for lack of a better term, off the passage of Dodd-Frank, the establishment of the Consumer Financial Protection Bureau, the changes at the international level and the U.S. level. I think we’re still at the final stages of getting rules delivered. But we as a company started positioning to the outcome before the statute was even passed, which was the right thing to do.

That’s less leverage, raising the capital levels, bringing liquidity up, simplifying the company, getting rid of things that weren’t important. We haven’t had proprietary trading for two years now. The big adjustment was getting out of the stuff we got out of, private equity, the proprietary trading in the markets business, the international operations we got out of. We’ve still got a few pieces left to go.

Q: You and other financial executives met with the president in October to voice concern over government gridlock and the danger of failing to raise the debt ceiling. Are you concerned that the federal government is headed for further brinksmanship in 2014, and what do you see as the dangers of that?

A. I think they’re working hard to get to a longer-term solution around the budget. The theory is that they’re getting pretty close to an agreement, and we’ll find out in the next few weeks. The business community is still worried about it, and I’m not talking about the financial business community.

When we go to a meeting like that, we’re not representing our companies as much as we’re representing our clients. Which for us is hundreds of thousands of small businesses and tens of thousands of larger companies and millions of consumers. What you see in the activity is the economy is growing. But the uncertainty in the business environment is causing them to adjust. With a rational solution, which they’re all committed to do, I think we could really uncork some economic activity.

Q: Sallie Krawcheck, the former head of wealth and investment management head at Bank of America, wrote a piece on LinkedIn last month saying that she never had the support of senior leadership after former CEO Ken Lewis left, that the center of power at the bank had left Charlotte and that the corporate culture was confusing. Do you feel any of those are accurate?

A. I wouldn’t comment on that. I think we have a good team and we’re doing a great job. The company returned 100 percent to shareholders last year and is on course to return 30-some-odd percent to shareholders this year. I think I’ll let the record speak for itself.

Q: Yes, the share price has done well again this year, but shareholders are still clamoring for a dividend increase. Is that in the cards this year?

A. We’re in the process (of working with regulators to determine how much Bank of America will be able to return to shareholders). Last year, we got the right to buy back $5 billion of common stock and $5.5 billion of preferred stock, and we’ll see how the numbers roll up in the process, and after we get done with it we’ll tell you guys what happened.

Q: You’re here to speak at the Charlotte Chamber’s annual economic forecast luncheon. What role do you feel you have in the city’s civic affairs and what do you ask of your local executives?

A. We’re in 93 markets, so we ask the Charles Bowman equivalent in all those markets to basically drive our philanthropic work, our teammate volunteer work, our work in the community in terms of community development and our business system. I do things in all kinds of markets, but this is our headquarters, so I do more stuff here. We have events that we support, we do a lot with the local arts community and stuff like that.

Bowman: What Brian demands of all those market presidents, and he convenes us once a month and in person twice a year, to really push that local presence. I don’t think we’ve lost anything in terms of our presence in Charlotte, particularly with senior leaders here and the number of volunteer hours. And that’s really driven by Brian’s expectations of senior leaders here. We’re all pushing hard to continue to deliver in Charlotte for the company.

Q: A few weeks ago, the Carolina Panthers played your favorite team, the New England Patriots, and the Panthers won 24-20. How did you feel about the game?

A. We maintain neutrality on all this stuff.

Q: But should the ruling have been pass interference in the end zone on the last play of the game?

A. I’ll let somebody else decide. There’s no upside in talking about NFL officiating. I’ve got enough things to deal with (laughs).

Dunn: 704-358-5235; Twitter: @andrew_dunn
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