Speaker 1: Bloomberg Audio Studios, podcasts, radio.
Speaker 2: News alongside me, the Bank of America, Chaef Bron, Moynihan, Bront,
Speaker 2: Good afternoon.
Speaker 1: It's great to be here. It's a nice, nice place
Speaker 1: that you.
Speaker 3: Know that it's not bad. It's going to see you.
Speaker 2: It's somewhat different President Macron. Is he trying to sell
Speaker 2: you a French bank? What's happening here?
Speaker 4: No, he's not trying to sell us a French bank.
Speaker 4: What he's trying to sell us all on is doing
Speaker 4: business in France.
Speaker 1: Choose France.
Speaker 4: And you know, we have moved from one hundred people
Speaker 4: here at about seven hundred and fifty people under Vanessa
Speaker 4: Holtz leadership for our European Broken Dealer trading operations, and
Speaker 4: they've been great and accommodative and the rules and stuff.
Speaker 4: It's been a great experience for us.
Speaker 2: What have they changed? What have they done to attract
Speaker 2: that investment from you?
Speaker 4: Well, we needed a talent because we're locating a lot
Speaker 4: of jobs here. Some people move, some people didn't. So
Speaker 4: they have a lot of talent. They have a lot
Speaker 4: of great people. They know the trading business because of
Speaker 4: the large French banks and the regulatory framework and so
Speaker 4: they've made it accommodative to bring it over, and then
Speaker 4: they've made some work real changes specific to our ployees
Speaker 4: and a financial services business made it easier and they're
Speaker 4: always ready. Now they're trying to say can you move
Speaker 4: a back office and other things here? So they're pitching
Speaker 4: a different style of economic development. But they've done a
Speaker 4: good job in changing France's reputation around the business community.
Speaker 4: There's a few hundred CEOs out there, all of whom
Speaker 4: have expand their operations in France.
Speaker 3: The reputation used to be pretty terrible.
Speaker 2: In fact, you know what the perception was, why would
Speaker 2: you hire anyone in France when you can do that
Speaker 2: in London. Was it Brexit that changed that in the
Speaker 2: last ten years? Is it something else as France actually
Speaker 2: got better as opposed to the UK get and worse.
Speaker 1: Well, I think what they did is they made their accommodative.
Speaker 4: They had the talent, they had the capability, schools could
Speaker 4: expand and take people. Those are real things, But what
Speaker 4: they really did is they said we need to be attractive,
Speaker 4: save lower tax rates.
Speaker 1: They've worked on some of the work rules.
Speaker 4: Those are longer term strategies that will help the country.
Speaker 2: They're trying to close the gap clearly with the United States.
Speaker 2: Let's talk about the United States as well. I got
Speaker 2: a note from the Bank of America Institute from Liz
Speaker 2: the great work they do over there, And I was
Speaker 2: looking at the average balance for a customer compared to
Speaker 2: the average back in twenty nineteen, and for lower income
Speaker 2: the numbers that you've got show it up close to
Speaker 2: sixty percent. What on earth is going on? How are
Speaker 2: the balances that much high now versus say, five years ago.
Speaker 4: Well, the thing is that count that was here in nineteen,
Speaker 4: lived through all the stimulus benefits and all the deposits
Speaker 4: within has also been ostensibly.
Speaker 1: Working since nineteen.
Speaker 4: Therefore they've gotten a wage increases and will inflation is
Speaker 4: tough on people, especially in the lower medium incomeing down
Speaker 4: in terms of increases. The wages have been growing. They
Speaker 4: just grew first, honestly, and then the prices grew after.
Speaker 4: So people remember the price growth, don't remember the wage
Speaker 4: growth so much. But I think, you know, it shows
Speaker 4: the brasilience the American consumer. And if you look at
Speaker 4: the spending through the month so far in May, they're
Speaker 4: spending about three or four percent more than they did
Speaker 4: last May.
Speaker 1: In the first part of May April was similar.
Speaker 4: It's slower, it's more consistent with lower growth, lower inflation economy,
Speaker 4: but it's still positive and positive means people are spending more.
Speaker 1: That means our economy is growing.
Speaker 4: And you know, in the rate structure, maybe higher and
Speaker 4: we can talk about that, but the reality is it's
Speaker 4: in decent shape. There's a thousand things that can go
Speaker 4: wrong tomorrow. For right now, everything's in pretty good shape.
Speaker 3: Are we living pretty well? Then? With interest rates not
Speaker 3: to five percent.
Speaker 1: We're living pretty well with them, and people are getting.
Speaker 3: Used to it.
Speaker 4: But the reality is, at some point I've had asked
Speaker 4: to bring to frontend rate to get to a normalized curve,
Speaker 4: because an inverted curve forever doesn't sort of economically compute.
Speaker 1: But I think our.
Speaker 4: Team thinks that the terminal rate, the end rate that
Speaker 4: they'll get to, will be more than a three and
Speaker 4: a half percent range as opposed to fifty basis point
Speaker 4: range or one percent range. And we haven't really had
Speaker 4: that since before the financial crisis. So there was a
Speaker 4: moment in sixteen seventy to eighteen when they raised rates
Speaker 4: and they already started bringing them down nineteen. So frankly
Speaker 4: in our team, I say, if you're under forty, you've
Speaker 4: never seen this kind of rate environment, and this is normal.
Speaker 4: And so three percent front end, three and a half,
Speaker 4: four and a half percent tenure, and.
Speaker 1: People will get used to it because America did a.
Speaker 4: Lot of economic activity prior to two thousand and seven
Speaker 4: for the two hundred plus years of existed, so people
Speaker 4: have been used to it. It's just we're in a
Speaker 4: very unusual time and so the adjustments are taking place
Speaker 4: and it's running through the economy.
Speaker 2: We're hearing from some companies that maybe the ross and
Speaker 2: cracks we had from Stobucks McDonald's offering a similar view
Speaker 2: on the US consumer. You've got some sixty nine million customers,
Speaker 2: what do you see? Do you see those cracks that
Speaker 2: so we're starting to emerge this year.
Speaker 1: So if you think about it, where were the cracks emerged?
Speaker 4: You talked about the average account balance is there're still
Speaker 4: especially for household seventy five one hundred thousand and below,
Speaker 4: the account bouncers are higher than the pandemic by a lot.
Speaker 4: If you think about the spending, the spending settled into
Speaker 4: a more normal where it was in sixteen, seventeen eighteen,
Speaker 4: the FEBEs raising raids inflation, they're pushing inflation was higher,
Speaker 4: they're pushing it down or holding it steady, you know.
Speaker 4: So that's normal. And then on the credit side, we're
Speaker 4: just normalizing to where we were nineteen. So in twenty
Speaker 4: nineteen is a fifty year low on credit customer company
Speaker 4: and basically last quarter we were a little bit higher
Speaker 4: than that, and so we're normalizing. So it's increasing off
Speaker 4: a base and people say, oh, your charge offs are
Speaker 4: going up, but they're getting back to where they were
Speaker 4: in nineteen and frankly, people thought that was a very
Speaker 4: good credit and it actually was. And so the question
Speaker 4: is where they go next. The good news is we're
Speaker 4: starting to see delinkednies flatten back out. Are you either
Speaker 4: not growing anymore? They normalize and then they're staying. That's
Speaker 4: good news on the consumer side, So it's all okay.
Speaker 4: It's just higher rates are tough on people on a
Speaker 4: mortgage market we you know, mortgage originations or way down.
Speaker 4: Higher rates are tough on corporations using their lines a
Speaker 4: little bit less because you know, small medium sized companies
Speaker 4: because it costs more and if it costs more, you're
Speaker 4: going to be more gedicious about it. So that kind
Speaker 4: of adjustment, what the FED is doing with rate structure
Speaker 4: is having the impact they want. On the other hand,
Speaker 4: the economy's kind of there, and now we got to
Speaker 4: be careful we don't overshoot the other way.
Speaker 1: It's right now we have a no landing.
Speaker 4: Honestly a two percent growth right because you can't say
Speaker 4: it's a soft landing, but that's been pushed out and
Speaker 4: pushed out to when it occurs, and we got to
Speaker 4: be careful that we don't overshoot. Because you see the
Speaker 4: consumer confidence numbers tipping download it. That's what you got
Speaker 4: to be careful. The consumer leaves the game, it's hard
Speaker 4: to get them restarted.
Speaker 2: So when I look at your consumer and whenever we repay,
Speaker 2: report on your numbers Q one, Q two, Q three,
Speaker 2: Q four. We look at the average FIICO score of
Speaker 2: some of the lending that happens, and it's really really high,
Speaker 2: like close to way one hundreds for vehicle lending.
Speaker 3: Can you tell me whether your.
Speaker 2: Experience is a decent snapshot of America or whether you're
Speaker 2: just catering to a much higher quality consumer.
Speaker 4: On the lending side, were prime, super prime, and auto
Speaker 4: for example, So there's a broader base of consumers out there.
Speaker 4: Eighty twenty rule prime versus subprime, and we don't play
Speaker 4: in the subprime at all, and that's because of.
Speaker 1: History and how we got here. On the deposit site
Speaker 1: completely different.
Speaker 4: We open accounts for anybody that really wants an account,
Speaker 4: and then we are a great started place for people
Speaker 4: to open the first back account and then grow with us,
Speaker 4: and we open a million of them basically over the
Speaker 4: last twelve months a million net new accounts. They started
Speaker 4: three thousand, they grow to seven thousand. So that's pretty
Speaker 4: representative America. And we're ninety percent plus the corehousehold account,
Speaker 4: meaning it's use for all.
Speaker 1: The day to day flows. We got pretty good data there.
Speaker 4: On lending side, we probably till just a little higher,
Speaker 4: but it's still strong.
Speaker 1: But eighty percent of America is prime space, so it's.
Speaker 4: Not like it's so the difficulties you're hearing about I
Speaker 4: can't really reflect on, but there tend to be in
Speaker 4: the subprime space.
Speaker 3: That's the consumer.
Speaker 2: Let's talk about businesses seeing a ton of debt issuance
Speaker 2: supplies for the roof that you want, what do you
Speaker 2: think that is. We've been trying to work out whether
Speaker 2: that's pulled forward from the back end of this year
Speaker 2: or catch up from the back end of last year.
Speaker 3: Which one is it.
Speaker 4: Well, I think if you did a lot of financing
Speaker 4: and it's coming up in the next couple of years.
Speaker 1: Your hope would be rates would follow and you get a.
Speaker 4: Lot more nominal rate because you may have done it,
Speaker 4: you know, in twenty twenty or something, when there's a
Speaker 4: massive amount of issues. The problem is it's not clear
Speaker 4: that's going to happen. So now people are saying, I
Speaker 4: don't want to run to the wall and then find
Speaker 4: out the market closes because some external event or something.
Speaker 4: So people are just financing it forward. They're probably was
Speaker 4: some pull through of the year when people said all
Speaker 4: rates may not go down, that won't we just get
Speaker 4: it done and.
Speaker 1: Get it over with. You know. The market's business is
Speaker 1: kind of fascinating.
Speaker 4: The first half of the year is always much more
Speaker 4: active in the second half a year, And he keeps saying,
Speaker 4: there's four quarters. Why wouldn't space out. It's just natural
Speaker 4: human behavior. People like to get things done. But I
Speaker 4: think it's been pretty strong and we feel pretty good
Speaker 4: about it. We had a good investment banking fee first quarter,
Speaker 4: which reallyflects financing activity, equity and debt. But I'm not.
Speaker 1: Sure there's any right answer there.
Speaker 4: But the reality is that it was very high, so
Speaker 4: the assumption would be go lower. But on the other hand,
Speaker 4: there's people have to look forward and say, am I
Speaker 4: going to wait till twenty twenty six to refinance that debt?
Speaker 4: Or frankly they're investing. You know, there's lots of capital
Speaker 4: improvements going on. People want to turn that out. There's
Speaker 4: lots of M and A is starting to kick up
Speaker 4: a little bit. People want to pay for those deals,
Speaker 4: So there's stuff going on too that requires them to
Speaker 4: raise incremental new money.
Speaker 3: Can we touch on M and A.
Speaker 2: We talked about this a few months ago when we
Speaker 2: visited you, and you talked about the reality for some
Speaker 2: companies that they can't make deals right now because they
Speaker 2: don't know if those deals will close. Do you sense
Speaker 2: that there is some momentum in the business now going
Speaker 2: into November or is there a sense that people are
Speaker 2: just going to wait to see how this washes out.
Speaker 4: The activity going on in the business is very high.
Speaker 4: A lot of conversations a lot of deals being signed up,
Speaker 4: there's still the concern still applies of whether deals which
Speaker 4: would appear to any in the past so to speak,
Speaker 4: have gone through without challenge out delay. To stay with
Speaker 4: the deal for a year plus takes a lot of
Speaker 4: intestinal for it to A lot of things can happen
Speaker 4: in your company, can happen the other company, People can
Speaker 4: lose enthusiasm for the deal. All things can go on,
Speaker 4: and so people have to sit there and say can
Speaker 4: I do that?
Speaker 1: Large companies can.
Speaker 4: Hang on longer because they just have more resiliency, especially
Speaker 4: if they're buying a smaller company. But a companies buying
Speaker 4: a company might be thirty forty percent of the size.
Speaker 4: They have to be very careful and they're cautious. They
Speaker 4: want to do it. The questions can they get it done?
Speaker 4: And that's one of the things we say to policymakers
Speaker 4: is clarify the rules and let people get through because
Speaker 4: in that men transaction, people think, well, it's just about
Speaker 4: getting bigger. Remember, on a sales side, that's obvious. The
Speaker 4: payment goes out to the shareholders and the employees a lot.
Speaker 1: That's good for them.
Speaker 4: But on a buy side, what does it mean that
Speaker 4: companies make an acquisition, getting bigger, going to dominate the world.
Speaker 4: We're going to go over and we're going to become
Speaker 4: the best at X, Y or Z. Without being able
Speaker 4: to make acquisitions, they can't.
Speaker 1: Get that strategic growth.
Speaker 4: So it's especially when you're talking to America. Only those
Speaker 4: American companies are looking to be the best companies in
Speaker 4: the world, and M and A is one of the
Speaker 4: ways they do it. If you stop them, you're stopping
Speaker 4: America's prosperity and growth.
Speaker 1: And I think, frankly, the.
Speaker 4: Theme here in Frances need business, we need labor, we
Speaker 4: need government, we need all work together. We need green
Speaker 4: we need oil and gas, we need nuclear, we need
Speaker 4: all work together.
Speaker 1: That idea of trying to figure out how it all works.
Speaker 4: Together because the end of the day, the numbers of
Speaker 4: employees for our companies and us growing on a worldwide
Speaker 4: stage is critical to health of America.
Speaker 3: Do you know get that message from Washington right now?
Speaker 3: You get it.
Speaker 4: It's mixed, It's mixed, And I think that's been the
Speaker 4: debate is how do you America is has a chance
Speaker 4: to win like it's never had to win because of
Speaker 4: the resilience of our economy, So when you look at
Speaker 4: two thousand and seven to now, you look at the
Speaker 4: size of European economy US a conment back then roughly
Speaker 4: the same size. Now America's fifty to sixty percent bigger.
Speaker 4: That's the resiliency of the American economy. So we have
Speaker 4: to have capitalism done right, and I think policies that
Speaker 4: promote that are what's going to drive America to stay
Speaker 4: great and be great. We can solve any problem and
Speaker 4: get through everything if we're growing. And one of the
Speaker 4: ways we grow is by letting them and a happen,
Speaker 4: by letting our companies do it fairly with the consumer,
Speaker 4: fairly with other companies, but.
Speaker 1: Do it the right way.
Speaker 3: You sound like a policy Mica.
Speaker 4: I just look, I've been at this a long time now,
Speaker 4: and I've seen ups and downs, you know. I think
Speaker 4: it's really interesting when you think about countries companies around
Speaker 4: the world, they want to.
Speaker 1: Invest in the United States.
Speaker 4: Talent work rules, uh, big market, you know, huge market,
Speaker 4: And I think there's real opportunity for American companies if
Speaker 4: we get this right.
Speaker 2: Every time we talk, the interview ends in the same place.
Speaker 2: Treasury Secretary thoughts on Washington.
Speaker 4: I have the greatest job in the world, and I've
Speaker 4: got a lot of work to do for Bank of America,
Speaker 4: so I'll let somebody else.
Speaker 1: Have that honor.
Speaker 2: I imagine that was a bottled answer ready the guy Brian.
Speaker 3: It's good to see it. Thank you.
Speaker 2: Sir Brian had that the Bank of America Chief Executive