CNBC Excerpts: CNBC Exclusive: CNBC's Becky Quick Sits Down with Bank of America CEO Brian Moynihan Today



Following are excerpts from the unofficial transcript of a CNBC EXCLUSIVE interview with Bank of America CEO Brian Moynihan. Excerpts from the interview will run throughout CNBC's Business Day programming beginning with CNBC's "Squawk Box" (6AM-9AM ET). Following is a link to the full interview on All references must be sourced to CNBC.


QUICK: There are a lot of concerns from businesses, especially as we get towards the end of the year. What are you seeing in your business lines right now, just in terms of consumer confidence?

MOYNIHAN: I'm more concerned about business behavior and slowing down than I am about consumer behavior. The people continue to spend, you continue to see them be a little bit better. Housing's a little bit better. All the things that effect, the stock market levels are higher, are in decent shape, and consumers and the economy's been growing. The question was will everything going on cause them to slow down again?

BECKY QUICK: What are you seeing from businesses right now, from your clients?

MOYNIHAN: beginning, really-- almost a year and a half ago, businesses are getting concerned about the nature of the dialogue about the fiscal situation in Washington and in Europe, and the issues that had to be dealt with long term and how it would affect, you know, near-term business in terms of what would be accelerated depreciation for investment in business, what would be the final demand. And, so, the uncertainty factor started weighing in. It just caused everybody to be much more cautious. And they continue to be more and more cautious, worried about what might happen next.

QUICK: You're a member of the Fix the Debt organization. you're worried about what happens if we go over the fiscal cliff. Lay out the scenario for how things would go down if we actually do move past January 1 without an agreement.

MOYNIHAN: You know if you get lots of economic-- economists' -- projections, you'll see that the general view is the economy would have negative growth or slightly negative growth or a couple percentage points, whatever there is. But it's a near-term recession impact. And that wouldn't be good to the economy 'cause it's been moving its way out. What's really after people is will we be serious about fixing the long-term problems of America's fiscal situation, basically having more revenue and more-- and less expenses so that we can get the thing more in line? And that's preoccupying people 'cause they're worried about the longer-term issue. I think that if this doesn't move forward with a solution that actually starts to lay out a groundwork to solve the long-term issues, I think it could have a potential of being disappointing, even if it is fixed

QUICK: We've talked to a lot of CEOs who say that they already have to go to their boards and they have to lay out their plans for what they're planning on doing in January. And they're-- they have to move forward with the plan that has an assumption that we don't get some sort of a solution. Do you hear that from your clients?

MOYNIHAN: Yes. Absolutely. So-- you know, I think it's-- not in January. They were actually forming these plans in August and September. So, even leading up to that, people were becoming more conservative. And I think that's had an impact on what the growth will be in '13, all things being equal. And I think we're in danger if this thing strings out into '13 that you could start to have problems of what '14 would look like. Because-- you know—municipalities and others make the budget in a half year, and then corporations make their budget basically early fall. And the decisions people are out there being thoughtful about are, "Should I build a plant? Should I add new equipment? What will the final demand be?" All that will be-- is pretty much done in corporate America right now for '13. And you really talk about what happens next. And--, so, my concern is we need to get a solution that has both some near-term fixes, for lack of a better term, and then a longer-term viewpoint that they're gonna be serious about and to give the confidence to how people actually think about '13 into '14 being a very constructive year and not think anything else.

QUICK: You've been to Washington. You've spoken with lawmakers about this. Have you told them these concerns about the short-term fix after short-term fix, of what it actually means?

MOYNIHAN: I try to do two things. One is I obviously talk to them and say-- I don't speak-- of Bank of America. We're a big company. We have 270,000 people. We have lots of people can help us think through all these scenarios. But I said put your shoes-- put yourself in the shoes of one of our clients that's a manufacturing company with 500 people and the amount of things that they face. they're probably more global than they were many years ago. So, they're worried about whether China's gonna grow as fast. Or what's Europe-- happening in Europe. Then, you have the United States' uncertainty, where they thought that was their rock that they understood and suddenly they pull back. And then you add they don't know the personal tax road, they don't know what the employee tax rates will be, and they pull back. And, so, what I try to talk to more about is what our clients see than what we see, because what I think we add value is we see 30,000 middle market companies in the country and by hearing from them, we can help articulate what they're seeing and how they're behaving.


QUICK: The fed's stress tests are coming up for next year and they kind of outlined what they're expecting. I know that the banks have to turn in their capital plans by January 7th. Can you tell us what you're going to ask them in terms of the dividend you plan?

MOYNIHAN: When we ask and when we hear, we'll let everybody know. And I think we fared well last year and I assume we'll fare well, but I can't share with what we're gonna ask for 'cause we haven't really finalized it yet.

QUICK: you have done a good job of capitalizing relative to your peers. Analysts have looked at that and said that that makes them suspect you will ask to raise your dividends next year. Is that a fair assumption?

MOYNIHAN: I tell you, when we get done, after we get through it, I'll tell you what we did.

QUICK: Okay. You look at what the fed's doing, and obviously it's got a big impact on the environment for banking. Some people call this QE infinity at this point, not just QE3, but now, potentially QE4. What does this mean over the longer term, and how difficult does it make it to be a banker in this environment?

MOYNIHAN: Oh-- when you say what the fed is doing in QE-- two and-- things like that-- they're trying to help the economy. And this is a big economy. And that's the thing that we have to be careful about as we think about the U.S. economy versus the rest of economies of the world. It's so big that once it goes in a direction, it's hard to reverse that. Now, the good news it-- has been growing. It's been growing relatively stable the last several quarters. And if we can keep that goin', it will materialize and produce the jobs and gain. Not as fast as we all want. We all want this to be over, but we want it to be back to, you know, 4.5% unemployment. We want 4% GPD growth. That's-- probably out there for a while. So-- but it's going forward. So, I think the key is, and what the fed's been trying' to do, is keep the economy goin' in the right direction. I think Chairman Bernanke's been extremely clear about that, and probably more clear than any fed chairman before. what it does for banking is, actually, it makes it a very difficult earnings environment.

QUICK: Right.

MOYNIHAN: But, believe me, I'd rather have higher interest rates because it means the economy's growing. If the economy's growing, we're gonna do better as an industry. And, so, you know, we all want the economy to grow because that is a lot more fun to be around.

QUICK: There has been the suggestion from some fed watchers-- that the fed would like to see interest rates go even lower in terms of mortgage rates and what you can offer. If I was a banker, the idea of offering a 30-year mortgage at even lower rates, is there a point where you say, "Hold on. We can't make these mortgages anymore if the rates continue to drop"?

MOYNIHAN: I think you have to go to the investors who actually own the assets. And, you know, there is an idea that if you-- if you get a mortgage now and it's so far below what we think is sort of normalized interest rates, that the-- it's, as we say, forever on your lips-- a moment on your lips, forever on your hips. I mean, that thing is gonna be stuck with you for a long period of time. And I think that's - we manage our balance sheet very close because that-- and what we mean by close is our duration of a balance sheet's a couple, two and a half years or so. So, a lotta mortgage we have, we swap out the interest rate risk because that is an industry and a company. And we're all doing that. But I think that there is an issue about how low nominally people go. It's just you know, at some point. But-- you know, people are-- the mortgage market's working well. I mean, the---- it's just getting 'em all done. it's a lot of work to get this many mortgages through the system with all the rules and work we have to do. And, so, we're getting it through. We'll do more mortgage originations this quarter than we did last quarter, than we did the quarter before, than we did the quarter before. And we're back to year-over-year growth after we got out some correspondent business last year, wholesale business. And, so, we're pleased what's going on the in mortgage business. But we have a lot more people than expected in the good side of the mortgage business generating mortgages right now.


QUICK: There was an article in the Wall Street Journal that suggested that Bank of America was gonna be pushing off higher fees into late next year. Is that accurate?

MOYNIHAN: I'm not sure, we are making decisions all day long. But let me tell you what we do in a consumer business. We look at a consumer business as different groups of customers. So, we have what we call our retail business, which is, you know, the general America out there. Then, we had a preferred business which would start with higher-income people before. And then we have a well management business. So, those are three groups. And, so, in our general consumer business, we are about being a relationship company. And when we mean relationship there, we mean your core banking camp, your-- first-- your credit card, your debit card, and-- potentially a home or a car loan. and that's what we're focused on. So, what we're doing is everything we can to drive relationship banking. And the more relationship people have with us, they'll be able to avoid fees and charges because it's a trade of value. And that's what we've been after. So-- there's a lot of talk about what decision we made, what day, and what-- I'd put it all in a broader context. In the retail team, that broad group of American customers, 20 million checking holders at Bank of America, we make money today. But we need to keep working on the business system to be better for our customers and better for our shareholders. In a preferred team, which is about 10 million of our checking customers, that's a growth business. We've dedicated literally thousands of people to drive revenue growth there at the same time. And they're very different business models. And, so, that's what we're trying to do today.

QUICK: so, the idea of higher fees-- because I've always thought of it as kind of-- in an airline industry, I don't expect them to start rolling back the fees that they charge for me to bring my bag on, if I wanna check a bag, because they make too much money on it right now. your thought is that the bank can continue to make revenue or make money off of this by getting them linked up with other products?

MOYNIHAN: So, a lot of the fee stuff that we talked about for years is overdraft fees and the interchange fees, and even the Card Act, which that's been out of our P&L for over a year. So literally, quarter by quarter, the fees are stable and growing. one of the areas we've invested a lot is mobile banking. And why mobile banking? It's because what that allows the customer to do is have a much more intimate relationship with us in much more real time.

On a given month, we have 22 million texts and e-mails we send out to customers warning them that their balance has dropped below $25 and they should deposit to avoid an overdraft fee. That kind of intimate relationship with that device that you carry around like it's, you know-- like it's your child almost. You know that intimate relationship is so different for us to talk to that customer.

QUICK: And you've been able to bring your cost structure pretty rapidly, more rapidly. And you have more advantages, I think, than a lot of the other big banks do at this point. Where do you kind of see that playing out over the next year?

MOYNIHAN: Well I think we continue to work the distribution network. So, we said we were- a year, a year and a half ago we'd bring an unbranched structure. And we're in the process of building that. We've been doing it costs across the whole company. Also including the cost of servicing the legacy assets, the mortgages from the old countrywide transactions. So, we've been bringing down the cost. It's what you can do. Our revenues are relatively stable and will grow with the economy. Now we've kind of repositioned the company, $20-odd billion, you know, dollars of revenue as a quarter. The question is we gotta bring the expenses down. And we're working every aspect in things like mobile banking and things like data center consolidation and things like repositioning some of the franchise you see out here, with where the opportunities are today versus where they were a couple years ago. All that fits into this. And we've done a reasonable job. We still have a lot of work to do.

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