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- [00:00]
Brian Moynihan
At CES. Michael McDermott, EVP of Samsung, spoke with Bloomberg Media Studios about what the company.
- [00:06]
Howard
Calls its next AI chapter, your companion to AI Living.
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Brian Moynihan
It's a shift from AI as a feature to AI as a trusted partner in everyday life.
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Interviewer/Host
Bloomberg Audio Studios Podcasts, radio news.
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Howard
This is my message to the Financial Times, who put out an article about the White House snubbing Brian Moynihan. If they'd seen the embrace between Brian and the commerce Secretary just moments ago, I don't think they would have written that article, would they?
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Interviewer/Host
You know, they were talking about saw you last night. It was great, Howard. Exactly.
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Howard
We had to shut down a studio, wasn't.
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Brian Moynihan
Yeah.
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Interviewer/Host
They needed to, you know, reconcile or discuss all of their previous, you know, experiences together. But they're all positive.
- [00:46]
Howard
Let's stick with the economy, the positive outlook. Joining us now is the bank of America Chairman and CEO Brian Moynihan. Brian, good to see you.
- [00:51]
Brian Moynihan
Good to see you. Howard and I were on a panel yesterday and then yesterday. Yeah, May the day before yesterday, then lunch today. And actually we're going to do another public venue where we're talking about how you raise the money to do all this investment he was talking about. So he's, he's, he's bullish on America. And, and he watched part of the interview. It sounds like he said that you guys are too. Yes.
- [01:12]
Howard
So let's stop the GDP forecast.
- [01:14]
Brian Moynihan
And so our research that, you know, our research turns one of the best in the world, led by a woman named Candice Browning Platt. And they all come out and they raised their GDP for us to 2.8% growth for 26. Right before we came to Davos, the world, about three and a half. They raised a point 0.1. And the important things I think, to think about the US as you think about the travel last time, from the last time we were here, last time we were here, we probably had two and a half percent for 26. Then Liberation Day, it drops all the way to one and a half. And then as a settling in of there's the four primary policies of the Trump administration. Trade, trade and tariff, tax, immigration and deregulation started settling in. We've raised it back to, to 6 and now 2.8. And that's. So that's bullish. And then underneath it, we see what the consumer really does. If we could talk about that, you know, the consumer SPE was strong in the fourth quarter. When I talk about that, it's four and a half trillion dollars are 70 million consumers which we're blessed to have put into the economy a year and that for the fourth quarter that grew about 5% over the 24th fourth quarter and so far in January it's growing a little faster that now. You got to be careful about two weeks don't make a quarter but it's staying up there strong.
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Howard
Well let's pair that GDP forecast with the bank and the business lines then. What position are you in to take advantage of that better growth story in America and what do you expect it to show up?
- [02:33]
Brian Moynihan
Well because who you are and we've been part owners of this company a long long time ago and Mike build a good thing around the markets business. That's what you're always interested even though there's all this other stuff that makes a lot of money. But look if we look at Jim Demar is now Co President Co. But but his team and markets this year had their last quarter had their 15th consecutive quarter of year over year growth. They just keep walking up 10% up for the fourth quarter. If you look at investment banking which is kind of interesting. So Matthew Coder team you know early in December we thought we were about a billion and a half and I went out at a conference and told people that and lo and behold we ended up a billion six, five. And that made 25 the second best year of investment banking fees in our company's history. And in the only other one was pandemic when everybody did a lot of financing. And next year we think we're bullish because the pipelines are full and the broadening out of the of the revenue stream into the IPO markets and other things which are got start a little bit this year but have been pretty depressed for a while. So that's coming in and deals, you know just the deal flow people can get deals done. When I was here a couple of Davos ago, you know the regulatory burdens were getting so high that you couldn't honestly tell a client who's trying to do a $5 billion deal to it because you said if you're going to stabilize your company for six months a year trying to get this through and you don't get it through, is that worth it. And that's sort of off the table. And even our industry, even though we can't do anything 6 months approval timelines are back to where they should be.
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Interviewer/Host
It seems like there is an incredible amount of bullishness here at Davos about deals, about IPOs, about all sorts of transactions and some of the issuances of debt and equity at the same time, there's a real concern about affordability. There's a concern about how well the consumer is going to be able to face off with inflation. I'm just wondering if this is the year that we see the two come together, because last year they didn't come together. We saw the same kind of joblessness in terms of the growth, and we saw the same kind of lack of enthusiasm in sentiment surveys.
- [04:26]
Brian Moynihan
Yeah. So if you look through the if you think about last year and think about how bullish people were last year because about the United States and the change in regulatory regime and things like that, you know, in April, things change, and then by the end of the year it changed back. And so I think that had a lot to do with if you look at the consumer and what we see, that spending level is not consistent with people who feel they're threatened in the future and in their spending on all kinds of things. Now, if you look at the research team, the bank of America Institute, if you look at the work they've done, if you put, you know, three groups of customers, lower income third, middle income third, upper income third, they're all growing, but the middle and up are growing a faster rate. And frankly, that drives a lot of the growth. But if you look at what everybody's spending on, they're spending on going out to eat, they're spending on booking vacations, are spending on essentials. So what's the affordability? It's the inflation that people remember. And that is going to take a while for people people to kind of put in a rearview mirror because people can remember. It's not too hard to remember five years pre Covid where X was cost you, you know, cost you this, a gallon of gas cost you that, your rent was this. And with that explosion in prices, wages also went up. But the consumer thinks more about the price side and then the question of will it turn over and get back in sync. And that's what's in those surveys. But if you watch your activity, and I'm a big believer, they'll tell you one thing, watch what they do, and that's what they're doing as of last Friday, in the consumer base across 70 million people, which are pretty good sample.
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Interviewer/Host
Size, they're spending a. And maybe they would spend even more if there was a 10% cap on credit card rates. I mean, look, this, this proposal got a lot of attention about a week ago, it feels like three years ago, and people pushed back and said it wasn't realistic. It Wasn't feasible. We had Jamie Dimon come out and discuss about how. Try it and see what happens. What's your take on that? How realistic are you seeing those proposals as being?
- [06:10]
Brian Moynihan
So if you step back, you know, we're all for affordability and financial products. So you guys have followed over the years of what we did on overdraft fees taking down by 90% over a course of 15 years, what we did on having a $500 loan account, $5, no interest rate, you could borrow emergency loan of $500. Eight million customers have used that over the last several years to give you a sense. So. And then we have a no frills credit card, no rewards and other stuff that people might attribute that is lower rate. It's not all the way down at that rate. So I think the question is, can we figure out a solution where you can avoid the equal and opposite reaction? As, as our friend Lafayette said in the Hamilton song, you know, every action has equal reaction. So the equal and opposite reaction we all talked about last week, if you actually make this a policy, you can reallocate credit, that will slow down spending, it will slow down credit availability. And that might not be what you're trying to achieve. So can you do something on a go forward basis, on a limited things and even one year, if you had to go reshuffle the whole deck, that would be pretty, pretty interesting. And to cause a lot of change in people's views of what they have available for credit. You want people to have available for credit because that gives them the courage to spend. And so, so we're trying to figure out, we're all working, trying to figure out, okay, given the affordability, given the thought process is a way that we can do something that might help without having that equal and opposite reaction, because that would not be good. Our point is to, to get the credit losses down to the point you can afford that rate, you actually can never have a charge off and you start to think about who can get credit, that thing. So we're working hard. We're trying to cope with some solutions like we are in some of the. For the proposals around mortgage and for 1k usage and trying to think of how you maybe can move the transfer of wealth faster by giving people in my age bracket the ability to move a 401k balance to pay, help their kid buy a house or something like that. We threw that out to Howard yesterday. These ideas of letting people use their own 4.1k with less they can borrow from today. But there's A way you can actually just take a withdrawal so they don't have the added debt burden. And then you got to work on the supply side of housing. And you know, the president was interesting. Yes, he's sensitive to the issue. If you bring down house prices to make it affordable, is that the right answer for everybody? But on the other hand, when you have the kind of over demand in some of the cities we work in, 30,000 units, in Charlotte, 20,000 Boston, 30, 40,000, 100,000, whatever. In New York, you could build a lot before. I think you'd have a major impact on the downward trend in prices.
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Interviewer/Host
Well, the DJT imposed deadline of January 20th has come and gone with the credit card caps. Have you spoken to the administration about this issue and talk to them about the potential counterintuitive problem with a 10% cap?
- [08:43]
Brian Moynihan
The team and I talk to administration all the time about these policies and stuff and they listen and they're trying to figure out the same issue from their side. How can they make America more affordable? And I think the number one thing we can do to make America more affordable is keep everybody employed. And earnings growth in our, in our, in our client base across 70 million people, we see a lot of paychecks come in and that's growing at 3%, 4%, and that's a good number. And so you know, that wage growth continuity will ultimately make people feel different about it. It's completely understandable why they feel this sort of animus of how these things came to their household and then what they want to do about it. And then rent affordability. We've given the types of ideas I.
- [09:24]
Howard
Talked about, we need to see some better hiring as well. Can we talk about hiring the story? It's difficult to understand what's happened with hiring in this country, in America over the last 12 months. What do you think has happened? What's your understanding of this drop off in hiring? Is it a supply side story? What do you think it is?
- [09:40]
Brian Moynihan
I think. I think there's a concern of availability of labor because of the population growth, immigration dynamics that I think again, the administration is trying to get much more fine around exactly what they're doing and not threatening people who've been naturalized citizens and things like that. And that was never what they're intended to do, but people started reading it. So I think if you looked at our small business surveys, labor availability became an issue again and hadn't been for a good while. And so, so I think that that's something we've advised administration be mindful of because you don't want that to become a constraint on people's views of growing. Now, the big hiring story here, where Davos and Becky saying this year is about last year is about AI. The year before was that in 2019, the premise was the fourth industrial revolution, which was AI without just saying it. And so it's not a new theme. And so I give you, since the first time, you probably asked somebody to decide the pandemic, say post pandemic about is AI going to cause you to change your hiring? Let's call it four years. There's called three years. We hired 65,000 people, bank of America three, 2,000 kids out of school, plus out of school every year now. And that's for the turnover rate, 8%. We got to hire out in the month of January, hire like 1300 people and we'll have the same headcount we had the month of December. Are these people doing exactly what the people left? Sometimes. Sometimes those jobs got eliminated. But that's what management is challenged is how do you think to make the. The changes we got to make the transformations we to make the customer experience the best it can be to grow the company and to manage expense. And that means you have to really pay attention to the headcount movement. And that's why we watch it carefully.
- [11:18]
Howard
That's where the tension is, though. I think for a lot of people, you've got the societal problem on the one hand, and on the other hand you've got the opportunity. And the opportunity is to do even more with what you've already got. And that's the productivity story and that's what you're selling to investors. That's the pitch at the moment, isn't it?
- [11:32]
Brian Moynihan
So we had 25,000 people in 2010 when I when the team took over. We have 212,000 people today. And you never heard anything about labor dislocation because we just kept planning ahead. But that's the application of technology. Just take the consumer business and I showed an investor day, 100,000 people to 50. Make it simple. If you look at that, the business is three times as big in terms of transactions activity. But that's the power of all. You've got eight devices sitting on the tables in front of you and what you'll do, it's a combination of AI plus alerts and things like that. People that get focused on just, you know, Erica growth. In our case, you say, no, there's literally a billion alerts that go out, which is basically artificial intelligence. People set up in advance to tell them things go on. You don't need them to go into Erica to ask if this, if a check went through My account above $2500 if you set the alerts.
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Interviewer/Host
You said something that we reflect on a lot on our show. You said a lot of things, but one thing in particular, that the business would grow, but that your staff would stay about the same size. And you said that about a year ago, maybe two years ago. That's a near term phenomenon. In five to 10 years, will it be the same or will it start to change in terms of actual shrinkage?
- [12:42]
Brian Moynihan
If, if Howard's right is his view of growth, we'll need a lot more human contact to keep up with it. I'll give you that. I'll give you the historical context. In 2019, I was in a room downstairs and people were wringing their hands and that's the way they do at Davos, that all this technology can take away the jobs. And so in preparation, I said, I've got to give some hope here. So I went and did the research. In 1969, America employed 80 million people. In 2019, we employed 160 million people. I think there was a lot of technology and change. It came from 1969 to 2019. None of that stuff in front of you was available. Had a computer at work, you wouldn't have email accounts. You're still getting charged by the minute for phone calls. And think about that change and think about we absorbed 80 million more people working. So I don't want to be Pollyanna about it, but I think you have to be optimistic that if we can grow the economy and grow the thing, we will absorb. And by the way, the population of us is very modest without immigration and there's a natural 2 plus percent of people, whatever it is, die every year. It's morbid, but that's what happens. And so, and so you have births that kind of replace it and you know, and people retire. And so that's why I think management's core challenges of manage this through and get employees to take the spirit of help drive the growth in the company and be a part of the solution and help us make it happen. And my guess is, yeah, it might incrementally move headcount, but if we manage it through attrition and retirements and stuff, we ought to be able manage the outcome.
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Howard
How did we ever live without the Bloomberg terminal? What was that ever like?
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Interviewer/Host
I don't think I ever do that.
- [14:11]
Howard
Just a final question you mentioned, Howard. We talked about it. We joked about at the start of the conversation the relationship with the White House. How would you characterize it in your own opinion right now?
- [14:19]
Brian Moynihan
Oh, look, I got. You always want to get invitation. This is Davos, a place invitation. So we invite you guys someplace. You want that invitation. So the race is good. We do continue to give lots of ideas. And it was, it was ironic that what was fun, we had a client dinner last night and Howard came to talk to clients. It was delayed as they finished up the news on Greenland. And he was able to come in and talk about what happened. And those were international clients who admittedly were confused for 48 hours. You know, and what I've tried to do with the administration's policies and talk, especially people outside nine states, to say, listen to what they're saying. You can figure out what's going to happen. But don't confuse security with a trade policy. They wanted to get action and they did. And that's a great thing. And you saw, you know, leave aside the market reaction, which can go up and down on a day. What you saw is the clients say, okay, I got it. Now let's go set the business plans that will help have that growth in the future.
- [15:09]
Howard
Brian, it's good to see you.
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Brian Moynihan
Good to see you.
- [15:11]
Howard
Looking forward to covering the World cup with you as well the next few months. Thank you, sir. Thank you very much. Brian Moynihan, the Bank of America Chairman and CEO.
- [15:18]
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