WHEN: Today, Wednesday, December 11, 2019
WHERE: Aired on CNBC's "Squawk Alley" – Interview live from Goldman Sachs' annual Financial Services Conference in NYC
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Bank of America Chairman and CEO Brian Moynihan and CNBC's Wilfred Frost which aired on CNBC's "Squawk Alley" (M-F 11AM – 12PM) today, Tuesday, December 11th. The interview took place live at Goldman Sachs' annual Financial Services Conference. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2019/12/11/watch-cnbcs-full-interview-with-bank-of-america-ceo-brian-moynihan.html.
All references must be sourced to CNBC.
WILFRED FROST: Jon, thanks so much for that. As you said here at the Goldman Sachs Financials Conference and joined by the Chairman and CEO of Bank of America, Brian Moynihan. Brian, great to see you as always. Thanks for joining us.
BRIAN MOYNIHAN: Great to be here. Good to see you again.
WILFRED FROST: We heard from you this morning presenting at the conference and some other banks here, as very optimistic about the consumer it seems. Talk us through that. And then you have some unique data about how retail sales is going in the holiday period.
BRIAN MOYNIHAN: Well, you have to start a little bit from the structure. And the end of the day, U.S. economy is two-thirds, 70% consumer driven. So, if the U.S. consumer is doing well, we know the economy will do pretty well. And so, if you look at our spending just in general last year to this year, it's up about 5.5% to 6%. And that's across $3 trillion of card usage, of checks written, of cash out of the ATMs. So, it's a big dataset. It's grown faster through the year. Picked up a bit of pace. So that's good news. And then if you look at the holiday spending, you know, the Wednesday before Thanksgiving to Cyber Monday, up double digits, strong, people are spending. So, that's good news for the U.S. economy. So, that helps sustain this long, long growth session we've had even longer. Because the U.S. consumer is employed, wages are growing and they will spend. It's a terrific win in the sales of the U.S. economy.
WILFRED FROST: When you see the pickup has happened for the consumer, what do you think has driven that? Is it cyclical factors like rates being low? Or is it something structural that is meant during this cycle, the middle class has grown in overall wealth?
BRIAN MOYNIHAN: At the end of the day, what's driving it is the average consumer in America, there's 330 million people, about 150 million of them work, they have a job. That job, they're growing in promotions and doing things. A teammate that started in 2010 for us at $50,000 has had 10% per year salary and wage growth per year. So, they're making more money and they're spending it. So, that's happening across--if you look at the recent data, you're seeing a faster growth rate in the median income level than we've seen so far in this recovery. So, that's all good news. But it's all driven by great employment, by America's success in the worldwide economy, the ability to employ people, the ability to pay them more. And that's what's driving consumers to spend. That's when they spend. They're not going to spending if they're worried about their job or worried about getting paid.
WILFRED FROST: Is the corporate sector weaker?
BRIAN MOYNIHAN: The corporate sector is more muted. Largely--you really have to think about triangles. You know, the largest companies being in smaller numbers at the top, and the big base, the big businesses. We're the largest lender to small business in the country. You know, loans grew, third quarter last year to third quarter this year, about 6,7, 8%, whatever it was. But shows you, there's good robust activity. And the confidence level of those small, medium-sized businesses is okay. Because, they're – the drip down a little bit came back up mostly because they're exposed to the U.S. economy. When you get bigger, you have the trade issues, you have to worry about China slowdown, you have to worry about Europe sluggishness, Japan's sluggishness, Brazil. Because you're involved in worldwide commerce, both in your – how you get your products to sell in the U.S., but also where you sell around the world. And so, our observation has been as you get higher up, the nervousness about what's going on, but they're still employing a lot of people, fighting to get people to do the work. But on the other hand, they're borrowing a little less. The corporate loan growth rates slow down this quarter, largely because people are trying to figure out 'When does this all mitigate?'
WILFRED FROST: We've got a Fed decision coming this afternoon. As we sit here today, compared to 12 months ago, we've seen the Fed ease significantly in the time in between. Given that optimistic view on the economy you just gave, are you surprised at the extent of their about-turn, of their pivot, since 12 months ago?
BRIAN MOYNIHAN: Well, I think they made it clear in the minutes that basically they have to be there to provide this insurance policy to make sure this very long recovery and growth cycle stays in there. And you know, if you look at the -- Chair Greenspan in the '90s and stuff, there have been times when you have to go in and help because of the impacts of trade, the impacts of things that are sort of outside the United States. So, it's not an observation by me to say they have put the insurance policy and they have said it. And I think now that they put enough in and I think they'll hold. And that's what the market says and that's what we believe in the company.
WILFRED FROST: We've seen some price wars in the online brokers and it's led to some consolidation. Do you fear that Charles Schwab -- a beefed-up Charles Schwab, as it is, is now a major competitor in a way it wasn't before to Meryl Lynch and Bank of America?
BRIAN MOYNIHAN: It was always a major competitor. And so, we've been competing with them for years. So, you know, the whole zero-dollar trade I think came at people in a way that surprised me. Because in 2006, we had a red bus we rode around in lower Manhattan here and announced zero-dollar trades. It's not a new concept. Hard to make revenue if you're not charging. And so, that's the thing you have to think about. But the way we do it is in conjunction with our broad partnership. So, our preferred customers had it. 80% of our trades are free. This week we announced that we picked up some on the other piece. But largely, we want people to bring the whole relationship with us. And we feel we're massively competitive on that. And you see the growth rate of the customers is very strong, no attrition, a very great rewards program across all their products and services. And so, we tie it in the broader thing. We are not in a stand-alone, get a person who just trades. We're into give us your full financial relationship and we'll deliver the whole company for you.
WILFRED FROST: Similarly, in other areas of the tech you've invested in, it's really delivering on the numbers. You released some this morning about the usage of Erica. Is it in a position now where you think it is better than any challenger that's out there?
BRIAN MOYNIHAN: Well, it's better -- we believe our products and services are better than any challenger and any mainstream competitor, whatever characterization you want to put. We study everybody, we see what customers need. But the real difference is our ability to invest at scale and to get scale out of our investments. So, we have 35 million round numbers of digital customers, 29 million mobile customers. In the third quarter, the mobile customers did a billion and a half interactions with us and set up 600,000 appointments at our branches. So, you have to have high touch and high tech in the interplay. 30% of our sales are digital. But the important thing is, if we invest a dollar per customer, it's 35 million dollars. I we invest a dollar per mobile customers, it's 29 million dollars. So, we can heavily sustain that competitive edge. Erica is an example of that. Just crossed 10 million. 65 million customer interactions, unique product. And so, we think we can be competitive with everybody. And by the way. we study the competition. We have to beat them.
WILFRED FROST: I mean, given all of that, and scale has become so, so important. Tech is a leading part of that. If you were on the board of a regional bank, what would you advise them to do? And how are they going to compete with the scale that you so clearly have?
BRIAN MOYNIHAN: Well, I think the idea of scale being valuable in national brands, et cetera, are very important. When I started in the business as a businessperson in the early '90s as a strategist, the world said, you know, there's going to be some massive consolidation. It just takes time and it takes alignment of boards and strategies and things. But the idea there will always be all kinds of banks in the United States, small, medium and large. But the idea of being larger is being proven out not only by the largest but also the midsize banks who get more scale and the ability to get efficiencies and everything you had. But what's really different from bank then is the ability to have a national brand. Only in the '80s have you been able to have a national franchise, first started. It wasn't national. Now you can have that. So, our ability to go into a place like Denver, which we did four or five years ago and get to number eight position very quickly with $100 million plus an average branch size is because our national brand leads us. And that's what competitors have to think about.
WILFRED FROST: You boost your minimum wage recently. It was already due to go up from $17 to $20 by the end of 2021. You brought that forward to take place Q1 next year. Why have you brought it forward?
BRIAN MOYNIHAN: Well, we have to be the best place for teammates to work. And we have to have great talent because this is a war for talent to do what we do. And we have, you know, 200,000 teammates and we make sure -- want to make sure we have the best people. So, what we do is we pay competitively across the board. At the minimum level, what we want to do is really bring our teammates up to the level, a starting salary, a summer clerk, whatever, gets $40,000 plus. And a lot of people enter the company much higher than that. But everybody gets that. A full array of benefits, way above a living wage calculation, when you add the costs up and the way they're calculated. Because we think that's the right thing to do as an employer. And we think the challenges other people came up and matched our 17. I'm sure other people will come up. But it's a competitive market out there. We need to continue to get the best people. We need them to see a career path. And raising the minimum wage as part of that. It's part of being the best place for teammates to work.
WILFRED FROST: Should politicians like Senator Warren who regularly criticize people who have accumulated vast wealth or criticize executive pay, should they acknowledge the changes you're making as well at the same time at the bottom?
BRIAN MOYNIHAN: Well, people acknowledge the changes we make. The Human Capital Report -- you asked me the question about $20 and competitors moving up and matching. You know, our industry is an industry which has a good profit margin and, therefore, it can pay its teammates well. And then those teammates have great lives. 600,000 people we insure through health care and stuff, those are all good things. So, my view is, the capital system is the system to help us drive the things we need in the world. We have to produce great returns for our shareholders. And we have to do what society needs from us. And being the best place to work in these types of activities, the training, the reskilling, the hiring we do from colleges. In the ten years I've been CEO, we've hired 15,000 college kids probably. Think that the dynamism we've put in. So, that's part of the ticket for being a large company. But we've got to do both. We've got to have great returns and do what society needs from us or else I won't be CEO anymore.
WILFRED FROST: Well, on that note, you just said ten years. It's next week, I think, the ten-year anniversary since you became CEO. Do you feel like you've got another full economic cycle that you want to lead the bank through the next downturn and out the other side? How do you think about that?
BRIAN MOYNIHAN: Well, I get asked the question a lot. The first thing I say is you're trying to get rid of me. Assuming people don't want to do that, at the end of the day, I serve at the discretion of the board. When I look at somebody like Mr. Buffett who is 88 and his intellectual drive and stuff, you know, that's somebody I think that's had--
WILFRED FROST: That's 28 more years though?
BRIAN MOYNIHAN: Well, I'm not sure I've got 28 in me. But, the idea is we have a great management team. We're working well together. We're having some success. We've got a lot more opportunity ahead of us. So, my challenge is to keep the motivation up for myself and my team. That's why we use the term nice start. It's both congratulatory--we've accomplished a lot in the last decade, but it's just a start and we've got a lot ahead of us. So, I'll work as long as the board will let me.
WILFRED FROST: When you took over, the bank was $130 billion in market cap. It's now over $300 billion. Has the easy growth happened as you get bigger? Have you passed the optimal size for Bank of America?
BRIAN MOYNIHAN: We actually are growing organically at a faster rate in terms of activity than we've ever grown at during this time. And that shows the power of really, frankly, having a company that had to go through so much in the early part of my tenure and early part of the decade and restructure it. Now it just sits there and says how can we be better for every customer, every client, every teammate, every shareholder, every community, every day. That's a wonderful place to be. I'm lucky that my predecessors did all the hard work to get us a franchise like this and all I have to do, with my team and they do all the hard work, is figure out how to drive it. And it's a powerful engine. It's wonderful to have the honor to lead it.
WILFRED FROST: Brian, always a pleasure to catch up. Congrats on the decade next week. Thanks for joining us. Brian Moynihan, the Chairman and CEO of Bank of America. Guys, I'll send it back to you.
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