WHEN: Today, Tuesday, December 6th
WHERE: CNBC's "Squawk on the Street"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Bank of America Chairman and CEO Brian Moynihan on CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET) today, Tuesday, December 6th. Following is a link to the article on CNBC.com: http://www.cnbc.com/2016/12/06/bank-of-america-ceo-brian-moynihan-sees-banks-benefiting-from-faster-growth.html. Follow is a link to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000573859.
All references must be sourced to CNBC.
CARL QUINTANILLA: AS YOU PROBABLY KNOW, FINANCIALS HAVE BEEN THE BIGGEST GAINER SINCE THE ELECTION. WILFRED FROST IS WITH B OF A'S BRIAN MOYNIHAN AT THE GOLDMAN SACHS FINANCIAL SERVICES CONFERENCE IN MANHATTAN THIS MORNING. HEY, WILF.
WILFRED FROST: HEY, CARL. YES, INDEED, AS YOU SAY, WITH BRIAN MOYNIHAN, THE CHAIRMAN AND CEO OF BANK OF AMERICA. BRIAN, GOOD MORNING.
BRIAN MOYNIHAN: GOOD MORNING, WILF.
FROST: THANKS VERY MUCH FOR JOINING US. BEFORE WE GET INTO THE MEAT OF BANK OF AMERICA, I JUST WANT TO ASK YOU TO REACT TO THAT CLIP YOU AND I JUST WATCHED TOGETHER OF DONALD TRUMP SPECIFICALLY MENTIONING, CRITICIZING ONE COMPANY, BOEING IN THIS INSTANCE. WE SAW DIRECT NEGOTIATIONS FROM THE PRESIDENT WITH CARRIER AND UTX LAST WEEK. ARE YOU PREPARED FOR THAT TO HAPPEN FOR BANK OF AMERICA, DIRECT PRESIDENT TO CEO NEGOTIATIONS? AND WHAT DO YOU THINK OF THAT SORT OF MANAGEMENT STYLE FROM THE PRESIDENT?
MOYNIHAN: WELL, I THINK THE MANAGEMENT STYLE, THE INVOLVEMENT I THINK PEOPLE WELCOME JUST BECAUSE IT MEANS THINGS WILL HAPPEN BUT IT'S NOT NEW. I MEAN, I THINK WE HAD AN EPISODE FIVE YEARS AGO WHERE THE PRESIDENT OF THE UNITED STATES CRITICIZED US FOR CHARGING A FEE AND THINGS, SO IT'S NOT NEW FOR IT TO BE REFLECTED UPON. WITH BANKS IT'S A LITTLE DIFFERENT BECAUSE WITH A REGULATORY ENVIRONMENT YOU HAVE A DIFFERENT SET OF PEOPLE THAT ARE IN WITH YOU AT ALL TIMES. SO IT'S NEW, BUT I DON'T THINK IT'S AS NEW AS PEOPLE THINK. I THINK IT WILL PLAY OUT BASED ON, AS YOUR TEAM SAID, BASED ON WHAT WILL REALLY HAPPEN.
FROST: LET'S TALK ABOUT THAT REGULATORY ENVIRONMENT, AND SPECIFICALLY, DODD-FRANK. JAMIE DIMON JUST TALKING DOWNSTAIRS MOMENTS AGO SAID WE'RE NOT ASKING FOR A WHOLESALE CHANGE TO DODD-FRANK, BUT IT'S ALWAYS RATIONAL TO LOOK AT THESE THINGS AGAIN. WHAT'S YOUR TAKE ON DEREGULATION THAT'S LIKELY UNDER DONALD TRUMP PRESIDENT-ELECT AND WHAT JAMIE DIMON JUST SAID?
MOYNIHAN: WELL, I THINK JAMIE AND THE GROUP OF CEOs THAT WORK IN THE INDUSTRY, WE ALL LOOK BACK AT WHAT WENT RIGHT AND WENT WRONG IN THE LATE 2006, '07, '08 AS A CRISIS BUILD UP AND WHAT HAPPENED. SO ADDING CAPITAL, ADDING LIQUIDITY, SIMPLIFYING YOUR COMPANY, FOCUSED ON WHAT THE CORE PURPOSE IS, THOSE ARE ALL GOOD THINGS. THE CEOs WHO RUN THESE COMPANIES, LARGE, MEDIUM SIZE OR BIG, ALL BELIEVE IN THAT. AND SO WHAT WE'RE NOT SAYING IS LET'S GO BACK TO WHERE WE CAN HAVE THESE PROBLEMS AND PEOPLE OUTSIDE OUR INDUSTRY THAT ARE DOING THINGS THAT THE INDUSTRY HAS TO CLEAN UP. LET'S GO BACK TO DOING IT. WE MADE THOSE CHANGES A LONG TIME AGO. AND SO THERE'S A LOT OF DEBATE ABOUT WHAT THE RIGHT COURSE FORWARD IS, BUT THE CLEAR THING IS LET'S BE CAREFUL ABOUT IT BECAUSE WE'RE SELF INTERESTED AS AN INDUSTRY. WE HAVE AN OBLIGATION THROUGH THE FDIC TO PAY THE COST OF CLEANUP AND SO WE WANT REASONABLE REGULATION AND WE THINK IT'S APPROPRIATE.
FROST: SO WE'RE NOT EXPECTING A WHOLESALE CHANGE IN THE REGULATION, YET YOUR STOCK IS UP 29% SINCE THE ELECTION, A METEORIC RISE IN SUCH A SHORT SPACE OF TIME. IS THAT JUSTIFIED, THAT MOVE? IS DONALD TRUMP REALLY THAT GOOD FOR BANK OF AMERICA?
MOYNIHAN: IF YOU THINK ABOUT TWO PARTS IN TIME. ONE IS, IN THE LEAD UP TO THE ELECTION, IF YOU TAKE OUR THIRD QUARTER RESULTS AND YOU SAW THE FUNDAMENTALS COMING THROUGH FOR ANOTHER QUARTER, THE EXPENSES CONTINUING TO BE MANAGED DOWN, THE REVENUE IS LIFTING, THE ACTIVITY COMING THROUGH AND THE ISSUES IN THE PAST THAT IT CUT UP OUR EARNINGS SUM ALL BEHIND US, SO I THINK THAT WAS A GOOD BASE. AND WE WERE UP ALMOST 8%, 10% LEADING INTO THE ELECTION. AND THE ELECTION THEN BASICALLY FOCUSED PEOPLE ON A FEW THINGS – FASTER GROWTH, THAT'S GOOD FOR BANK OF AMERICA, HIGHER INTEREST RATE STRUCTURE, THAT IS GOOD FOR BANK OF AMERICA. AND INVESTORS IN PARTICULAR WERE SKEPTICAL OF THE ISSUE THAT EVERY TIME WE THINK OUR INDUSTRY ACROSS THE REGULATORY THRESHOLD GOT TO THE HURDLE RATES ON CAPITAL, BUILT THE LIQUIDITY, THAT THERE WAS ANOTHER BURDEN, HURDLE PLACED IN FRONT OF THEM. I THINK THE INVESTORS HAVE BEEN RESPONDING THINKING THAT WON'T HAPPEN WITH AS MUCH VOLUME AS BEFORE. AND THEREFORE, WE CAN START TO GET TO THE CAPITAL AND RELEASE IT BACK TO THE SHAREHOLDERS, MAKE MORE LOANS AND HELP DRIVE THAT ECONOMY. SO IF YOU THINK ABOUT THOSE TYPES OF THINGS, IT'S NO SURPRISE WE'VE PUSHED UP HARD.
FROST: THERE'S ONE OTHER AREA WHICH I THINK PERHAPS HAS BEEN LESS SPOKEN ABOUT IN THE LAST COUPLE OF WEEKS, BUT I'VE HEARD A LOT TODAY HERE AT THE CONFERENCE, WHICH IS THE PROSPECT FOR MORE M&A, PARTICULARLY WHEN YOU CONSIDER THE CHANCE OF FOREIGN CASH BEING BROUGHT BACK INTO THE U.S. IS THAT SOMETHING YOU'RE INCREASINGLY POSITIVE ABOUT, THAT WE COULD SEE, IN FACT, PICK UP SIGNIFICANTLY NEXT YEAR?
MOYNIHAN: I THINK YOU'LL SEE – I THINK OUR PEOPLE THINK WE'LL SEE MORE M&A. AS BANK OF AMERICA, WE CAN'T DO AN ACQUISITION, IT IS ILLEGAL IN THE UNITED STATES. SO THAT MAKES MY LIFE EASIER. I DON'T HAVE TO WORRY ABOUT IT. BUT AS A PROVIDER OF SERVICES TO OTHER COMPANIES, THE ANIMAL SPIRITS SO CALLED, THE VIEW OF PEOPLE SAYING, HEY, I THINK I CAN SEE FORWARD WITH MORE DURATION, I CAN UNDERSTAND IT, AND ALSO WE'RE STILL IN A LOW GROWTH ENVIRONMENT. AND ONE OF THE WAYS M&A HELPS YOU IS TO CONSOLIDATE COMPANIES AND GET SYNERGIES OUT OF THEM IN LOWER GROWTH ENVIRONMENTS. SO EVEN IF THE GROWTH PICKS UP A LITTLE BIT, THE TOP LINE GROWTH FOR BIG COMPANIES LARGELY EXCEEDING THE GDP GROWTH IS HARD, SO THEREFORE THEY ARE GOING TO BE LOOKING FOR WAYS TO CREATE MORE VALUE FOR THEIR SHAREHOLDERS. SO I THINK THAT'S ABSOLUTELY RIGHT. AND IN OUR INDUSTRY, IN BANKING, THE BELIEF IS THINGS COULD MOVE, IT'S NOT RELEVANT TO US AS A PRINCIPLE.
FROST: BRIAN, EXCUSE ME, WE'VE GOT A QUESTION OR TWO FROM THE STUDIO. JIM CRAMER COMING UP NEXT. MY APOLOGIES. JIM IS COMING IN WITH IT, BRIAN.
JIM CRAMER: COUPLE OF THINGS, BRIAN. ONE, I KNOW THAT AS RATES GO UP, IT'S TERRIFIC FOR BANK OF AMERICA. TWO, IF WE GET RATE HIKES, IT'S GREAT. BUT ALSO OIL HAS COME UP. I KNOW YOU HAD SOME LOANS THAT YOU HAD TALKED ABOUT THAT WERE CRITICIZED, BUT MAYBE THEY COME BACK. IS THIS JUST THAT ONE OF THE MOMENTS WHERE THE REASON WHY THE STOCK IS WELL IN ADVANCE AT ABOVE ITS BOOK VALUE IS THAT YOU'VE GOT TAILWINDS GALORE?
MOYNIHAN: JIM, I THINK THAT'S RIGHT. I THINK YOU'VE GOT TO JUXTAPOSE THAT AGAINST THE HEADWINDS THAT WE'D HAD OVER THE LAST SEVERAL QUARTERS AND YEARS WHERE WE HAD CLEANING UP LEGACY ISSUES. YOU KNOW, THINGS – THE ECONOMY WAS CONSIDERED TO BE LOWER GROWTH AND THE ISSUE WAS IT WOULD BE EVEN LOWER GROWTH AND RATES SEEMED TO BE GOING NOWHERE. SO YOU REVERSE THAT AND THEY'RE ALL TAILWINDS. SAME FACTS WITH A LITTLE BIT OF OPTIMISM, GLASS-HALF-FULL-PRODUCED TAILWINDS INSTEAD OF HEADWINDS.
FROST: BRIAN, WE KNOW A LOT ABOUT YOUR INVESTMENT IN TECHNOLOGY IN RECENT YEARS. IS THAT SOMETHING YOU'RE REALLY SEEING THE BENEFITS OF NOW WITH THE INVESTMENT BEHIND YOU AND THE BENEFITS TO COME? AND HOW MANY MORE STORES, BRANCHES, MIGHT IT ALLOW YOU TO CLOSE OVER THE NEXT THREE OR FOUR YEARS?
MOYNIHAN: WHEN WE THINK ABOUT TECHNOLOGY INVESTMENTS, THINKING ALONG A COUPLE OF CATEGORIES. ONE IS BETTER PRODUCTS FOR CONSUMERS AND CUSTOMERS, COMMERCIAL CUSTOMERS AND INVESTING CUSTOMERS. THE SECOND IS PRODUCTIVITY. PRODUCTIVITY HAS TWO BROAD STRENGTHS TO IT. ONE IS, PEOPLE PRODUCTIVITY. OUR PEOPLE CAN DO MORE. AND THE SECOND IS LARGELY AROUND THE EFFICIENCY OF OPERATING A PLATFORM – SO LESS DATA CENTERS, LESS ARCHITECTURE AROUND THAT, THE WAY YOU DEVELOP AND STUFF. WE'RE MAKING GAINS IN ALL THOSE AREAS. SO IF YOU THINK ABOUT IN OUR COMPUTER BACKBONE, THE CLOUD FOR OUR COMPANY, THE INTERNAL CLOUD, WE'VE TAKEN OUT ABOUT $400 OR $500 MILLION IN SAVINGS AND WE EXPECT TO TAKE OUT $400 OR $500 MILLION A YEAR OUT OF A $5 BILLION BASE OVER THE NEXT SEVERAL YEARS BY CONTINUING TO CONSOLIDATE DATA CENTERS. SO THERE'S JUST A LOT OF ROOM AHEAD OF US. THERE'S BASIC PAPER TO ELECTRONIC. WE STILL HAVE A LOT OF PAPER. CASH TO MOVE AROUND OUR COMPANY IS $5 BILLION. THE MINUTE WE MOVE A PAYMENT TO ELECTRONIC, WE SAVE SOME SMALL PORTION OF THAT. YOU JUST HAVE TO DO IT OVER AND OVER. SO TECHNOLOGY TO MAKE THAT HAPPEN. BUT NEVER FORGET ON THE FRONT END, IT'S BETTER FEATURE FUNCTIONALITY FOR THE CLIENTS AND CUSTOMERS AND THAT'S WHAT WE'RE DRIVING.
FROST: IN TERMS OF THE TOP LINE, WE KNOW IT'S EXPECTED TO PICK UP. WE TALKED ABOUT THE SOME OF THE TAILWINDS AND JIM MENTIONED SOME OF THOSE. WHERE IS THAT GOING TO GO, THOUGH? IS IT GOING TO BE STRAIGHT TO THE BOTTOM LINE? IS YOUR FORECASTS FOR COSTS – THE AIM OF $53 BILLION – IS THAT TARGET STILL THE SAME OR AS THE TOP LINE PICKS UP, WILL WE ACTUALLY SEE THE COST LINE PICK UP A LITTLE BIT TOO?
MOYNIHAN: IF IT PICKS UP, IT'S NOT GOING TO PICK UP. WE HAVE $53 BILLION. BUT WHAT PUTS UPWARD PRESSURE ON COSTS ARE THE CLASSIC THINGS. MORE INCENTIVE COMPENSATION, BECAUSE MORE CLIENT DRIVEN ACTIVITY, AND THEN INFLATION. WE HAVE HEALTH CARE COSTS OF $2 BILLION A YEAR AND THAT GOES UP. WHAT YOU HAVE TO DO IS MANAGE THE REST OF THE COSTS TO MAKE THAT FLATTEN OUT. AND SO IF YOU THINK ABOUT IT, WE'RE SAYING WE CAN GO FROM ABOUT A 54, $55 BILLION RUN RATE TODAY TO ABOUT 53, AT THE SAME TIME WE ARE MAKING THE INVESTMENTS YOU ARE TALKING ABOUT. ABSORBING THOSE INFLATIONARY COSTS. SO YOU HAVE TO BE ABLE TO WALK AND CHEW GUM. YOU HAVE TO BE ABLE TO DRIVE THE TOP LINE THAT WILL PUT COST PRESSURE ON THOSE ISSUES AT THE SAME TIME YOU'RE BRINGING IT TO THE BOTTOM LINE. RATE STRUCTURE ALL MOVES THE BOTTOM LINE BASICALLY.
FROST: AND SO FOR THE MOST PART, YOU POSITIONED YOURSELF IN THE RECENT FIVE YEARS AND YOU'RE READY TO NOW ENJOY THE TIDE AS IT GETS LIFTED AS IT WERE?
MOYNIHAN: AND THE RATE STRUCTURE, REMEMBER, IS NOT SOMETHING WE DID TO POSITION THE COMPANY. IT'S JUST THE BASIC BUSINESS MODEL. WE HAVE A TRILLION THREE OF DEPOSITS. 500 BILLION OF THEM ARE INTEREST FREE. THEY DON'T CHANGE WHEN RATES GO UP, BUT THEY BECOME MORE VALUABLE. IE: YOUR COST OF FUND STAYS DOWN AND THAT'S BEEN A LONG TIME COMING. THE FED'S FUND RATE HAS BEEN BASICALLY AT 25 BASIS POINTS AND RECENTLY LAST YEAR AT THIS TIME MOVED TO 50, SO THAT CHANGE IS VERY VALUABLE TO THE COMPANY. 60% OF THE VALUE OF A RATE MOVE FOR 100 BASIS POINTS IS DUE THE FRONT END. SO WE DIDN'T DECIDE WE WERE GOING TO RUN THE COMPANY, THE BUSINESS MODEL LEADS YOU HERE. AND IT WILL PRODUCE MORE AND THAT WILL FALL TO THE BOTTOM LINE GOING FORWARD.
FROST: JUST QUICKLY WANTED TO ASK YOU ABOUT TRUMP'S STRATEGIC AND POLICY COUNCIL. WERE YOU ASKED TO BE ON THAT AS WELL OR NOT?
MOYNIHAN: I'M NOT ON IT.
FROST: THERE'S QUITE A LOT OF GOLDMAN SACHS ALUMNI IN THE CABINET. JAMIE DIMON MADE IT ON TO THE POLICY COUNCIL. DO YOU FEEL LEFT OUT AND IS THAT A STRATEGIC DISADVANTAGE FOR YOU NOT BEING ON THOSE THINGS?
MOYNIHAN: NO, WE HAVE GOOD ADVOCATES ON THAT COUNCIL FROM, YOU KNOW, ALL THE PEOPLE ON IT. THE POINTS WE MADE AND TOMORROW WE HAVE THE BUSINESS ROUNDTABLE, AND IN A FEW WEEKS WE'LL HAVE THE FINANCIAL SERVICES TEAMS GET TOGETHER. SO THE IDEA IS THAT MOST OF THE INDUSTRY SPEAKS WITH A SINGLE VOICE SO WE JUST NEED TO GET OUR IDEAS ON THE TABLE ABOUT THINGS WE CAN DO TO HELP THE REAL ECONOMY GROW. THIS IS WHAT IT'S ABOUT, WHETHER IT'S THE BUSINESS ROUNDTABLE, IT'S THE CHAMBER OF COMMERCE, WHETHER IT'S THE VARIOUS TRADE GROUPS IN THE FINANCIAL SERVICES, IT IS ABOUT HOW CAN WE HELP THE REAL ECONOMY GROW. THAT IS OUR JOB AS A BANK. AND THAT'S OUR JOB COLLECTIVE AS BANKS. SO THOSE TEAMMATES, THOSE COLLEAGUES OF MINE WILL SPEAK FOR US. I DON'T THINK – IF WE HAVE 100 PEOPLE IN THE ROOM, WE'RE NOT GOING TO GET A LOT DONE, SO WE'LL MAKE OUR POSITIONS KNOWN, BUT THEY'RE VERY SIMILAR ACROSS THE INDUSTRIES.
FROST: JUST A QUCK COMMENT TO ROUND THINGS OFF, IF THE ITALY REFERENDUM WENT AGAINST THE ESTABLISHMENT AGAIN, IS THAT ANOTHER FACTOR THAT ALLOWS YOU TO TAKE MARKET SHARE IN EUROPE?
MOYNIHAN: I THINK EUROPE IS JUST IN A CONSTANT SET OF ELECTION OUTCOMES, THIS ONE IS PROBABLY LESS EXPECTED. BUT IT'S STILL LESS EXPECTED IF YOU WENT BACK SIX MONTHS OR A YEAR AGO. WE JUST HAVE TO BE MINDFUL OF THAT. IT CONTINUES TO CAUSE UNCERTAINTY IN EUROPE, WHICH SLOWS DOWN THE ECONOMY. ALTHOUGH, THE NUMBERS OUT OF GERMANY WERE STRONG AND I THINK THE EURO BEING DOWN WILL HELP. SO I THINK THIS WILL WORK THROUGH. BUT IT IS A VERY COMPLEX SYSTEM THEY'RE WORKING THROUGH WITH ALL THE DIFFERENT COUNTRIES AND ALL THE DIFFERENT POINTS OF VIEW AND THEN THE ELECTION CYCLE PRECEDING THAT WE'VE ALL GOT TO BE READY FOR. SO WHETHER IT IS THE UK/BREXIT, WHETHER IT IS THE ITALY REFERENDUM, WHETHER IT IS IMPENDING FRENCH ELECTIONS, THESE ARE ALL THINGS THAT WE HAVE TO POSITION OUR COMPANY TO BE INSULATED FROM A REALLY NEGATIVE OUTCOME AND THEN JUST HELP THE PEOPLE THROUGH THE OTHER SIDE OF IT.
FROST: BRIAN, A PLEASURE AS ALWAYS. THANK YOU VERY MUCH, BRIAN MOYNIHAN OF BANK OF AMERICA, GUYS.
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