CNBC Exclusive: CNBC Transcript: Bank Of America Chairman & CEO Brian Moynihan speaks with CNBC’s Wilfred Frost Today On “Squawk Alley”
WHEN: TODAY, TUESDAY, December 4, 2018
WHERE: CNBC’S “SQUAWK ALLEY”
Talk of inflation has been swirling for some time amid all the stimulus that's been pouring into the market and the soaring debt levels in the U.S. The Federal Reserve has said that any inflation that does occur will be temporary, but one hedge fund macro trader says there are plenty of reasons not to Read More
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Bank of America Chairman & CEO Brian Moynihan. Following is a link to video of the interview:
Watch CNBC’s full interview with Bank of America CEO Brian Moynihan
All references must be sourced to CNBC.
Wilfred frost: thank you very much I am joined by the chairman & CEO of Bank of America just to reference you may hear background noises of protests for hypocracy against immigration against Jamie Dimon that’s taking place downstairs but we can ignore that. Apologies for the background noise Brian. Great to have you with us.
Brian Moynihan: great to be here Wilf.
Frost: I want to start in fact where I started with Tim Sloan an hour or so ago. And that is to say clearly there’s more bearishness out there in the stock market. When you talk to your customers and look at all the data you get from all of them, does it match up with that bearishness or are they still pretty positive?
Moynihan: it doesn’t match up and what you’re seeing the underlying activity, I think you have to back up. And think as we came into ’18, there was a view of synchronized growth in a world and everyone was going to grow, and as you get to the end of ’18 and think of ’19, the basic prediction for the us economy, our predictions go from 3% to 2.7 growth the world is basically flat year over year. So now you are setting up in the discussion about ’19 the are economies slowing but that growth for the us would be one of the fastest growth rates in the last decade, but there’s a half full, half empty view out there. Now let’s get into what the real consumers are doing. Over the holiday weekend, consumers of Bank of America, debit, credit cards spent 6% more than last year, up 7 or 8% from the year before so you are seeing strong continued growth spending cash across the whole franchise, year to date through end of November, up 9% in terms of cash spending on goods and services inside that, you’re seeing retail is growing especially in the Christmas season. But you are also seeing a lot on travel, entertainment, dining out, which frankly is good for employment in the sense that those take a lot of people to make happen. We feel very good about the us economy the predictions are it will slow a little bit but underneath that is a strong growth rate we feel strong about. Unemployment, wage growth, all of the factors are strong, including small business enthusiasm that we just put out the other day.
Frost: you were in Buenos Aires last week ahead of the g20 how did you gage what came out of that was it better or worse than you hoped for in terms of the trade truce?
Moynihan: I think expectation was building as I was there that you would hear announcement that the two largest economies in the world will work it out at the end of the day, a reporter like yourself you know there’s a trade debate going on, there’s a good argument about what’s right. Large economies ought to be reciprocal ought to be open because the smaller economies have disadvantages that we have to help them develop and come along. But the largest economies ought to be able to go at it and be competitive, and let’s see who wins. That’s the debate that’s going on how you do that, it is a lot of work you see ebbs and flows that’s on people’s minds the belief was coming into it you would hear a calming down, and I think in the last few days heard both sides of that that was the main theme in terms of global was about trade and about the impacts of trade war on all the economies, even though it might be a couple of economies involved.
Frost: is that the biggest risk to your business in 2019 or interest rates what level rate hike would you be absolutely fine with
Moynihan: at the end of the day I wouldn’t -- there’s not being fine with anything– the question is why the fed raising rates, its because the underlying economy is strengthening and they are taking accommodation out. That’s a very constructive environment for every business in the u.S. And the world because of the amount of consumption going on in the us. Two-thirds of the us economy is consumer that’s an economy the size of china’s economy and multiples of any other economies. It is key that the U.S. Economy grow if the reason rates are going up because the economy is growing, that’s a good thing. Our expectation is long the markets, a few rate rises next year, there’s great debate about how fast or slow they will go. Watch the fed, they’re data dependent. They told you that and there is no new news here. The reality is the underlying economy is growing and I think the risk for inflation is not high, inflation is growing wage growth is stronger, unemployment so you expect them to normalize the rate path, and our expectation is they move it up three, three and a quarter a normalize rate environment.
Frost: you’re relaxed about rate rises. So is Tim Sloan earlier. Yet we see the yield curve inverted the three to five year part and your stock price as we look at it live is down 3.4%. Today largely because of the yield curve. What are investors missing when you see a big one day sell off in relation to that factor that you’re relaxed about?
Moynihan: last five days, the stock price is flat. Pick which day you’re happy or not so happy.
Frost: right but in general. There’s no argument people don’t like this flattening of the yield curve.
Moynihan: well they don’t because they think it is recession so you have to go back to the economy prediction. Some people say yield curve predicted last 12 out of the last 5 recessions there’s that debate going on. Consistent with what goes on is the economic transition is potential-yield curve as the fed tightens loan rates stay down so the question is whether it iscausation or outcome there’s a great debate among economists. The reality is what you’re seeing underneath is a prediction that next year’s economy will grow it is very different in a lot of ways if you look back historically, our experts tell you, you have to remember the environment around the world is different. Nominal rate environment is different. Treasury 3%, versus Germany of the same duration. 40 basis points. The flight to quality and flight to yield is messing up a lot of the things. If it is inverting, if recession is coming, that’s not good for anybody. If it is inverting because of technical aspects, that’s not bad. The question will be we believe it is because the economy is strong and they’re taking out accomodations.
Frost: want to ask about brexit. You have the necessary approvals to fully operate from the Dublin headquarters in Ireland earlier this week and you moved 125 employees there this Monday. Total head count in the United Kingdom is 6500 or thereabouts if we head towards a no deal, disorderly hard brexit, of that 6500, now that Dublin offices are ready, how many more move to Dublin.
Moynihan: we don’t know because we don’t know ultimately what the rules will be how it would operate.
Frost: if there are no rules set.
Moynihan: we will be prepared to operate day one. There won’t be a lot of movemment as we bring the broker dealer up in France then staff it up there will be a modest group of people to staff. The real question is for the next five years, what happens. If there’s hard border, financial border between the UK and EU without accommodation of how it operates, you have to resettle to even it out. There’s three pieces of business, EU business which obviouly has to go within the EU, and the rest of the world business and UK business stays in the UK. The question is how does the rest of the world business fall for us and competitors that will come by how the deals were worked out. Even if there’s a hard in march, what goes on beyond will be interesting. It isn’t that we’re going to do something in Dublin. We are done. We have a European bank, it is up and operating UK bank is no longer merged and in that won’t go back the broker deal will come in Parris and we’ll staff it up. Said 100 some people in terms of numbers.
Frost: I want to talk about digitalization. The big four u.S. Retail banks investing $40 billion in total $10 billion each next biggest spend only 2.5 billion. 4 x difference from rivals above it does this have similar effect as digitalization has in other consumer facing businesses in that it is a big boone for incumbents but smaller companies are left behind
Moynihan: it is a big boom for everybody, you can provide better service to the customer and take the cost structure down and pass through to the customer the way to think about the work on the consumer side, 26 million mobile customers, 35 million digital customers, about 1.5 billion log ins last quarter this is not something that’s coming this is something that already exists 20 odd% of sales are on digital. All is important to how you run the franchise. It has given the customer better services on their time, the way they want to do it, 24 by 7, and at the same time reduced operating costs, that changes the operating structure. That mix is good we help small banks, Zell is made available to drive payments volumes are growing 100% a year on that. The goal is to bring that banking system into the digital age and make it more efficient for customers. On the commercial side, it goes on everybody talks about consumer on the commercial side, the same impacts. Mobile cash pro is up and operation very efficiently. You think a treasurer of a company would sit at their desk and interface. They want the mobile interface because that’s how they conduct their daily life. You go on there, tells you you have three payments to approve it is good for all the companies. The fact that the competitive edge we are pushing for large company is not versus small companies, it is for the industry as a whole.
Frost: Brian thank you for joining us. We much appreciate it.