WHEN: Today, Monday, July 16, 2018
WHERE: CNBC’s “Mad Money w/ Jim Cramer”
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Bank of America Chairman and CEO Brian Moynihan and CNBC’s Jim Cramer on CNBC’s “Mad Money w/ Jim Cramer” (M-F 6PM – 7PM) today, Monday, July 16th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2018/07/16/bank-of-america-ceo-mobile-banking-strength-not-just-from-millennials.html?play=1.
All references must be sourced to CNBC.
JIM CRAMER: Has this market finally decided to give the banks the credit they deserve? When JP Morgan, Citigroup, and Wells Fargo reported on Friday, it sure didn't seem that way. Even a strong quarter from JP Morgan wasn't enough to get the-- the group rolling. Yet when Bank of America reported a great number this morning, the group finally caught a bid. It marked a huge turn for the big money centers. Bank of America delivered a terrific a six-cent earnings beat off of a 57-cent basis with higher than expected revenue, and robust loan growth, rising deposits, aggressive cost cuts, and superb digitization. Basically, Bank of America proved they don't need high long-term interest rates to make a killing here. So could this mark the beginning of a longer-term rally in the financials? Let's check in with Brian Moynihan, he's the chairman and CEO of Bank of America, to get a better sense of the quarter and what his company's prospects are. Mr. Moynihan, welcome back to Mad Money. Good to see you, Brian. Have a seat.
BRIAN MOYNIHAN: Good to see you, Jim. Thanks.
JIM CRAMER: There are so many great lines in this quarter. Exceptional loan growth. The fact that you can return so much money. We're gonna get to those. The $2.8 trillion deposit. But I am struck by the digitization. You are well ahead of all the other banks. And tell us what that means for you and for shareholders.
BRIAN MOYNIHAN: Well, if you think about what digitization means, it means better convenience for the customer and lower operating costs for us and more assured transactions. More straight-through processing that they used to call in the securities business. But think on a consumer business-- customer interfaces. It-- it enables the process to work better. And all that produces a good result for the customer. Our customer score-- service scores continue to go up, while at the same time the cost structure in the consumer bank especially continue to come down and got to 48% efficiency ratio this quarter.
JIM CRAMER: Now, how about-- how many millions of people are using digital devices? And how many are active mobile users?
BRIAN MOYNIHAN: So you start from the high level. We're at 35 million plus digital users, which would be any device. Computer screen coming to Bank of America .com, et cetera. 25 million plus of those are mobile. In other words, they're going through an app. They've logged in a h-- 1.4 billion times this past quarter. That's up 500 million times over the last year probably. And so there are a lot of people using it. A lot of people using it. Those are active users. They've had to actually use the app in the last month-- actively to do something.
JIM CRAMER: Wow. So-- give me a sense of what that means. How much are you able to save from just having plain old brick and mortar operations? It would seem that this is a considerable saving versus that.
BRIAN MOYNIHAN: So you have to think-- go back about 10 years when we started-- seeing the impacts. So th-- you know-- internet banking started in the mid-'90s. Dialup servers. It was all-- took a long time to take off. What happened was s-- with the advent of the smartphone, and, you know, iPhone, and things like that, you saw this thing take off. And so if you go back 10 years ago, we had 6,100 branches. Today, we have about 4,400, 4,300. You had 100,000 teammates working in that business. Now, you have 60. But importantly, you had 12,000 who were relationship managers. Now, you have 25,000. So you've had this massive switch in terms of what we do in the branches and the customers. So it is high touch and high tech. And that – it requires both.
JIM CRAMER: Well, I would guess-- from someone from the business, I would say you have more revenue producers than you have people who don't make money for the bank.
BRIAN MOYNIHAN: Well it-- I would say that that's true. But I think you have to remember that we're a service business. So you come and need a power of attorney, that may not produce instantaneous revenue. But why you are asking for it probably has something to do with something that's going on in your life. So the relationship managers, they're-- they're enhancing that relationship rather than just taking a check over the transom, which-- there's not a lot of value added-- view to that-- the customer. "Just get it right, please." Whereas if you come in and I have a question about, I need a mortgage, need-- a car-- car loan, or a card loan, or something like that, or, more importantly, my mom's-- my mother's sick-- hopefully she's not. But my m-- if my mother were sick, I need, you know, some help to-- for power of attorney for h-- medical, or move her accounts, and things like that. That's what you want to go on in branches. Even on a service basis, you want those really interesting, hard questions where people need real help.
JIM CRAMER: Now-- we on Mad Money care passionately about buybacks and dividends. It looks like the government has really green lit you versus a year ago. A sign of your health.
BRIAN MOYNIHAN: Right. And we've just been building that up. So if you go back over the years, we've been asked for more, and more, and more. So last year-- in the first approval we got 17 billion of total, eight-- almost 18 of capital return. This year, we got 26. Last year, we also went back and got an extra five when we redeemed with the Buffett warrants. And he converted into common. And so that's been a great move for us. The $26 billion, you know, it's getting pretty close to the earnings levels projected for us. And dividends will be moved from 12 cents to 15 cents a quarter or 60 cents a year, which gets us a $30 price, a $2 yield. It's-- a 2% yield. It's-- it's all good.
JIM CRAMER: Now, a lot of people are fretting that perhaps loan growth is slowing down. Your loan growth figure indicates the opposite.
BRIAN MOYNIHAN: Yeah, we-- we point that out to people. You know, it's-- I beg your pardon, we never promised you a rose garden. We never promised 10% loan growth. 'Cause the way we run the engine and the way we-- client select and the way we focus in prime consumer is such that we're growing. But if you looked in our materials today, you saw that year over year for the last four second quarters we've grown basically 5 to 6% every year over the previous quarter. And it's just consistent grinding it out. Good, high-quality loan growth that customers want and that we can get paid back.
JIM CRAMER: Right. Now, after the close today, Netflix reported a disappointing quarter. What does that have to do with Bank of America? Well, you have Erica. And it looks like Erica's doing the opposite of what Netflix is doing tonight. That's been very strong growth in a very short period of time.
BRIAN MOYNIHAN: Yeah. So you talk about that mobile application in-- in 25 million customers' hands. So the question is-- you have to type in it, and you have to do all the things. What Erica does is it's an artificial intelligence, voice-activated or text-activated engine that changes your interface dramatically and starts to anticipate what you need. So, for example, if-- the other day I opened it up. I said I wanted to pay-- someone a bill. I just said, "Pay--" in that case it was a landscaper, you know, "$422." It found the person. It said, "Do you want to pay $422?" "Yes." It's done. As opposed to typing in the name, and finding, and scrolling through, and everything. It's just an easier way. And then after it learns more about me, it will start to plan my finances. It will tell me I'm spending more than I earn or whatever the case may be or I'm spending a lot. If I want all the payments I've made for restaurants, it'll tell me that time outta all my accounts what we've made by typing. It's-- it's-- so it's an artificial intelligence thing. But initially, it really just works to help me be able to use the device much more to my-- benefit.
JIM CRAMER: I mean, to me when I hear this, I think, "Okay."
BRIAN MOYNIHAN: Let's-- let's just remember. It went from starting to 2 million users in about-- we had 50,000 in April and we're at 2 million today.
JIM CRAMER: Well--
BRIAN MOYNIHAN: So this is taking off.
JIM CRAMER: But those are-- a lot of those people have to be millennials who otherwise would think that, "Maybe I should just go and be on PayPal." Not that PayPal isn't a partner.
BRIAN MOYNIHAN: Well, PayPal is more on the-- payment side--
BRIAN MOYNIHAN: --with Zelle and stuff. But in terms of, you know, our mobile capabilities and-- you know, m-- core mobile banking go far beyond the millennials. I got asked the question on earnings call today, "Is this millennials?" You say, "Well, there's 35 million digital users. There aren't enough millennials to do that." And so it spreads across-- all age cohorts. Even guys as old as us, Jim. But-- but the rally on the millennial side-- the-- the Zelle-- the take-up of something like-- Zelle or—or a Erica is gonna be a little bit more the people who are used to, you know, using their-- different devices at home to talk to and have 'em activate stuff. That'll change over time. I use it because it's just easier for me 'cause I got big fingers on a little phone. It's hard to type.
JIM CRAMER: Bank of America has a great call on what our country looks like right now. I got great confidence after listening to your call, thinking, "You know what? Stop being gloomy." It looks like business is pretty good in this country.
BRIAN MOYNIHAN: So we-- we start-- and you think about the U.S. economy. Two thirds driven by the consumer. 70%. Whatever people say at this moment. And we got good insight on the consumer. So for the first six months of the year, our consumer spending, which is checks written, cash out of the ATMs, cash over the tellers, bill payments, debit and credit cards, wires, ACH, Zelle payments is up 9% over the first six months of last year. That was 6% the y-- year before that and 3%. So we've gone three, six, nine. That's an acceleration of consumer spending. And I would posture, leave aside some completely out of-- character risk out there, that if the U.S. consumer spending at a 10% growth rate year over year, that is a good thing for America and the economy will be in good shape. Now, that is on about a trillion, four of dollars spent. So it's not a small sample when you think about double that to almost $3 trillion a year. And think about that size relative to the economy. That's just the consumer side. That-- that's literally you or me sending money to our account. So you think about that growth rate. That bodes well. I heard from our team today that, you know, our internal people 'cause of tax reform, 'cause of deregulation-- are probably, you know, saying that they're gonna-- you know, the-- the good team-- Bank of America, Merrill Lynch, that research team's at 4% GDP growth for this-- for the second quarter.
JIM CRAMER: What?
BRIAN MOYNIHAN: They've moved it up a little bit. Three-- for the whole year, 2.93%. But this quarter, they think it might have a four handle in it. That will be a big number when you think about it. That's for the second quarter. And you're seeing more people come along. So whether 3.8 or 4, that's a big number. And you saw retail sales adv-- revise up heavily. You see that consumer spending. All that bodes well. So we feel good about the U.S. economy. Now, is the unknown out of this out there? Is there unknown of that? There's always an unknown. Right now-- people are employed. They're making more money. Tax reform has benefited them. Tax reform has benefited companies. And you're seeing that flow through the economy.
JIM CRAMER: What a great story. Great story for our country. Great story for Bank of America. That's Brian Moynihan, chairman and CEO of Bank of America. The stock is too cheap. Stay with Cramer.
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