Bank of America, the Charlotte-based lender whose stock surged 17 percent since Donald Trump was elected president, said it can increase revenue and cut costs amid optimism that the next administration will boost economic growth and curb financial regulations.
The firm hopes that expenses drop as regulatory burdens ease, though it’s a “little too early to know” what Trump’s policies will portend for the industry, Chief Operating Officer Tom Montag said Tuesday to kick off an investor conference sponsored by Bank of America in New York. He said there are ways to change U.S. regulations to make them better and more efficient.
There’s a “sense of optimism” that “the government will work better together to supply the foundation of growth that we as a bank can optimize,” said Montag, 59. “This might provide the opportunity to have that debate.”
Trump’s transition team signaled last week that it wants to dismantle key parts of the Dodd-Frank Act, the sweeping overhaul of U.S. financial regulation aimed at preventing future crises. In addition to repealing Dodd-Frank, the president-elect’s transition website outlines policies to restrain regulation, including calls for a moratorium on new rules so existing measures can be reviewed.
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“We have a lot of regulations, so it’s probably healthy to take a breath,” said Montag, who runs the bank’s trading and investment-banking units.
While some of those rules have helped U.S. banks appear strong compared with competitors in other countries, they also have resulted in billions of dollars of “inert liquidity” as derivatives trades have become more costly to execute because of margin requirements, Montag said. His wish list under a new regulatory regime would include more flexibility on rules governing bank lending, he said in response to a question from an investor.
The bank’s trading business improved by a double-digit percentage during the fourth quarter compared with a year earlier, Montag said. Revenue in the period has been “pretty good,” though not as robust as the third quarter.
“The market moves around Election Day we handled well,” Montag said. “I think it was our No. 1 volume day in the New York Stock Exchange ever, and our No. 1 volume day in Japan.”
An area of growth the firm is focusing on is middle-market investment banking, Montag said. The company is seeking to boost its share of that fee pool by 1 percent to 2 percent, and has hired bankers in Seattle, Atlanta and Denver to help achieve that goal, he said. It’s also seeking to expand revenue from municipal bonds, a business where the bank is already a market leader, he said.
Bank of America has made its biggest overall share gains in Europe and Asia, where it has taken longer to integrate the lender’s operations with those of Merrill Lynch, which it purchased in 2009. The bank’s largest trading increases have come in rates and foreign exchange, Montag said.