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FIRST ON CNBC: CNBC EXCERPTS: BANK OF AMERICA CEO BRIAN MOYNIHAN SITS DOWN WITH CNBC’S BECKY QUICK

When: Today, Friday, March 9th at 6AM ET

Where: CNBC’s “Squawk Box

Following are excerpts from the unofficial transcript of a FIRST ON CNBC interview with Bank of America CEO Brian Moynihan today, Friday, March 9th at 6AM ET on CNBC’s “Squawk Box” (M-F, 6-9AM ET). All references must be sourced to CNBC.

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MOYNIHAN ON CONSUMERS & HOUSING

BECKY QUICK: Brian, thank you very much for doing this today.

BRIAN MOYNIHAN: Oh, pleasure to be here.

BECKY QUICK: It's great to talk to you. And one of the things we always like to hear from Bank of America is what you see in the economy right now, because you see what's happening in about half of all American households. So what are you seeing right now?

BRIAN MOYNIHAN: Well, we're seeing what's consistent with multiple months in a row now, going on for a couple years. I've been talking about since I've been C.E.O., it's been the same. So you think about consumers, consumers are spending about 6% more on the credit and debit cards, February '12 versus February '11.

And that's been pretty consistent. So a lot of people worry about gas prices, you know, seeing it creep up as-- a percentage of what they spend. But overall, there's been -- reasonable spending-- by consumers-- spending on discretionary items. And so we're grinding forward from a consumer -- respect. And then on the delinquency and credit cards and all the stuff that we worried about two or three years ago, you can send-- continue to see the delinquencies come down, mortgage … come down.

So there's a healing process going on, and the consumers the have made it through are in good shape. Now, there's still high unemployment, and we got to work on that as a country, we got to work on that issue. But when you think about it, the consumers, the health has been restoring and they're continuing to drive the economy.

BECKY QUICK: Has it been a fairly steady move, because there are some people who worry that in the last few months, we may have seen a little bit of a pullback. Is that--

BRIAN MOYNIHAN: We didn't see that honestly. I mean, the November-- October/November/December statistics, year over year, same 6% or 7% increases. It's always going to ebb and flow based on literally how weekends fall and stuff. But we saw no difference. And so when everybody's really getting, "We're going to fall back," the consumer's behavior, not about Europe, that is different, but about the consumers… we didn't see the change.

BECKY QUICK: What about housing? We have had a number of people who have come on our air recently, including Warren Buffett, Donald Trump, Bill Ackman, who have all said that-- "Individual homes is a great place to be right now. That if we haven't turned the corner, we're about to very soon." What do you think?

BRIAN MOYNIHAN: I think that the housing market continues to heal. We've seen delinquencies come down to portfolios. The-- when the property is available for sale, it sells relatively quickly. Prices, you know, there's lots of debates about whether we're up 1% or down 1%. But think about in the context of how far they've come down the-- the first 30% or the next 1% does.

And so it's stable. This settlement allows us to start move forward. I think-- the work is going on. And yes-- we've still got work to do, over the next couple years-- in terms of-- moving through the excesses of past. But on the other hand, the core in the underlying markets and most markets are progressing forward.

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MOYNIHAN ON COUNTRYWIDE

BECKY QUICK: You do point out though that there's going to be a long time to come. Some of these settlements have gotten things started. There's a lot of legacy… expenses that you still have to worry about and still deal with. When you look at Countrywide, was there ever a point where you wish that-- you just didn't have to deal with it?

BRIAN MOYNIHAN: Well, that'd be unfair, because remember behind every mortgage is a household, an American household and working through this process. I think it's actually-- could lead us onto financial ramifications which have been very difficult from a standpoint of a company that does the right thing for the borrowers and stuff-- I think it's good for us to-- work with these borrowers.

I know that people have different opinions about how fast it goes out. So we're trying to do the right thing. We hired 45,000 people to do it. But it-- you know, this has been a very difficult thing. And it's-- there's no good outcome out of it in a sense that, you know, it's a very difficult, stressful time. And so think about that when you are a broad consumer franchise, a broad consumer brand, it's difficult for us.

Now, it's moving forward. And I think as-- if we have reached various accommodations and setter and stuff, you're starting to see us move forward. I think it's sober-minded among the policy miners-- makers that we've got to move this forward, because the only way to get to the other side is actually get there. And that's-- and you don't want to rush it, but you've got to move quickly.

BECKY QUICK: And I understand that from the people's perspective and from the people that you're dealing with every day. But this is an acquisition that was made before your watch, and you're left to deal with the mess. Is there ever a point when you think that you'd be better off without Countrywide from a shareholder's perspective?

BRIAN MOYNIHAN: There is no way that if you know what we knew now that you would've taken that much housing risk when it was taken. The question is, what did people know? And so-- the work not only is it the-- financial-- we spend, you know, from our shareholder's perspective, we spend $2 billion a quarter, just to operationally work on these loans. And so that's upside from here.

But it's a reality where we are. And so you'll never get anybody to say, "It was a lot of-- you know, spend multiples a company--" whatever they've earned, many multiples, it's difficult acquisition. But my job, once we got a hold of it, was to start to shrink the risk and then move forward. And frankly restore the brand and the product because of what we do for people in housing, which has been good things.

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MOYNIHAN ON LEGACY & INTEREST RATES

BECKY QUICK: Okay. You said today at the Citi conference that the legacy asset expenses would peak probably in the first half of 2012. Does that mean that beyond that is a turning point for the company?

BRIAN MOYNIHAN: Well, let's think about work. And so at the beginning of 2011, we had 1.6 million, 60 plus mortgage we'd been working on, so delinquent mortgages we were working on, maybe-- 60 plus…. At the end of the year, we're about a million and one, and that's coming down. So what is causing us to still peak over is all the new programs we're putting in require people to look back what they have to do on the foreclosure.

That all sort of is going through the systems now, implementing the new settlement. And so that's why we're comfortable it'll-- it's sort of peaking as we speak. That is the operating expense. And the litigation expenses bounce around a little bit, but we put a lot aside on that. But the operating expenses we're pretty comfortable with.

That's because the million six is down to a million one, and as we watch new delinquencies, they're getting better every month. And so long term, if I slow down the front end, I'm moving the stuff through the system, I can get there, and that's what we're seeing happen. But it'll take all of this year and all of next year before we get more … almost done.

BECKY QUICK: Brian, you have a great deposit base with Bank of America, something like a trillion dollars-- that are deposited here. But the problem that faces Bank of America and other banks that have large deposit bases is the fed funds rate being so low at this point. It kind of squeezes you on-- with the interest rates and what you get-- in between the two. The fed is now saying that it doesn't expect to raise interest rates until 2014. First of all, do you think that that's the case, based on what you see in the economy?

BRIAN MOYNIHAN: You know, I could get our economist to give you a better thing. Intuitively, I think we're seeing the economy getting more constructive maybe than people think. So whether it's then or slightly less than that, it doesn't change what you have to do now, because whether it's beginning of '14, early '13, I think we've got a lot-- a lot of quarters….

So what are we doing about it, that's the question. And so we started a while back moving down extension of retail business two years ago. And so if you think about this is not new, this low-interest rate environment, it's been going on a lot. So what do we do? We did last year, we net … branches by 200. Closing branches-- the customer behaviors changed a lot.

That transaction has gone to the A.T.M.'s, the transaction gone to the phones. So our job is to manage expenses in that regard. And as rates come up, we'll make more money. And the consumers really won't pay any more money. It's really the fundamental of the balance sheet, and it's a little hard to explain.

But I don't-- you know, whether it's that period or not, what we're doing now is manage expenses well, provide great customer service-- basically try to manage the build from product to relationship with our customer so that if they bring us more relationship, we can then provide better services. That's going on as we speak. And when rates flip, that'll be even better.

BECKY QUICK: What does it mean for you? If rates were to go up by let's say 1%, what would it mean?

BRIAN MOYNIHAN: I'd say it's-- … rate of-- what we've told people is that-- one and a half percent, that's about three-quarters of a billion dollars, … quarter.

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MOYNIHAN ON THE FED

BECKY QUICK: Okay. We have the stress test coming up. And I'm wondering if there's anything you think the fed shouldn't make public? Or there-- or are there other lines that you think could-- put the banking system as a whole-- in any sort of question?

BRIAN MOYNIHAN: Well, I think you need to exact from the question-- to think about what's going on. The scenario's a very difficult scenario. But think about how much capital our institutions-- I mean our institutions have, how much liquidity, how much risk we've taken down. And-- so I think, you know, if you think at the results, which, you know, we'll all hear about in the next few weeks-- you've got to put in the context of what they're testing, which is a very draconian situation for the purpose of proving our resilient our industry is.

So when I talk to the conference today, we show what we looked like in 2008 as we went to sort of the first stress test in early 2009, where we raised money for-- versus now, twice as much equity. Not a little bit more, twice as much equity. $300 billion less in risk … 20% more. You sort of look at it, and we're not-- everybody's like that.

And so I think this is a chance to show how strong American banking industry is. So the disclosure, you know, we always got to be careful, because it gets into future projections, and there's concern about that. And we-- and the people should be concerned. But the reality is, there's it's called … stress scenario which says that this industry can absorb that stress scenario with housing down 20% and unemployment, I don't know, 12% today.

That'd be as if it were happening today. Not out in the future, today, when it's 8%. That's a very stressful scenario. Which, you know, frankly if this industry is capitalizing up to, that's a pretty powerful statement of what's gone on in the last couple years, and our country should be happy with that, proud of that, relative to other countries that are just still struggling … question….

BECKY QUICK: Especially Europe, I guess?

BRIAN MOYNIHAN: Well, that's the question, is so we capitalize our industry. We had access in our industry, we're-- you know, we had to make changes to the people run the business, but we've brought the risk down and brought the capital up and brought the liquidity up. But the resiliency in America is we got through it, in 2009, 2010. So we're on the other-- side of it.

Now, that doesn't mean Europe shaking doesn't make us all concerned. But just think of the tough times in the capital markets in the latter part of last year, we made that revenue. All our competitors did. There was no big…. And you had some of the most stressful situations that you had.

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MOYNIHAN ON CAPITAL

BECKY QUICK: I know today you did-- you did say that you had not asked the feds if you could return capital to shareholders in the form of a dividend. But I wonder if you know what the hurdle is, what you'd have to get to before you would be able to return a dividend?

BRIAN MOYNIHAN: Well, you know, I don't, because it's a sort of a process and you learn your way through. But we didn't ask this year, largely-- because frankly as you get closer to Basel III we're now thinking four, five quarters ahead, you're setting up the next turn on the track, which is Basel III. So last year at this time, it was about Basel I and sort of like that one way.

Then-- you're sort of in the middle, you're given into the process, those set scores. So, you know, our job now is to make sure we have a Basel III. And what's shifted is the amount of capital's moved up. And so we're working that. So I think it-- the responsible thing for us to do is just to get keep getting the balance sheet in better and better shape.

Keep doing the types of things we've done to build capital faster than it appears…. So we went from, say, .6% of tier one common headquarter to 9.6% plus or nine-- 9.8% I think it was in the fourth quarter. Think about that in a quarter. Other people move 23 basis points. Our job is to keep moving up like that. And so I think when we get through that, then it'll start the question. It'll come, the capital's there's, it's just going on a balance sheet. The investor's still on it. We focus on tangible … share and that's going up, and that's where ….

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