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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Brian Winnahan, who's a chairman and CEO of course of

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Speaker 2: Bank of America. Brian, really great to have you with

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Speaker 2: us and we appreciate you joining us. You're here to

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Speaker 2: celebrate a significant milestone. What's the mood music been like?

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Speaker 1: Well, it's been a great time to be here. Our

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Speaker 1: team is celebrating sixty years in this country and they're

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Speaker 1: all excited about it. We have a great business here

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Speaker 1: and Joe and the team do a great job, and yeah,

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Speaker 1: the mood's pretty strong. I mean, everybody's worried about geopolitics

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Speaker 1: and all that stuff, but the day to day business

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Speaker 1: activity that people seem confident. Our team's having a good

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Speaker 1: year in the market's business and a corporate banking, investment

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Speaker 1: banking business that wish IPOs and going fast around the world.

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Speaker 1: But overall it's pretty good.

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Speaker 2: In terms of how you characterize the Australian market, how

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Speaker 2: do you see it?

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Speaker 3: Is it a growth market for the business?

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Speaker 1: It is? It is. We basically, if you think about

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Speaker 1: the last decade or so, we triple the size of

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Speaker 1: our exposures here following our clients. We do corporate investment

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Speaker 1: banking for large company treasury services to move money around

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Speaker 1: the world for those companies, and then we do markets

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Speaker 1: for equity investors and fixed income investors from around the

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Speaker 1: world and Australia and investors investing around the world. And

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Speaker 1: so those businesses are strong growth business in our company

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Speaker 1: and growing here. And a simple way to think about

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Speaker 1: is we triple the size of the risk WEARTICU in

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Speaker 1: the last ten years.

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Speaker 2: It's fascinating time for markets at the moment, as it

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Speaker 2: has been over the past few years. But I think

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Speaker 2: the last time we saw a treasury sale after this extent,

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Speaker 2: Alan Greenspan was in the middle of orchestrating ourself landing.

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Speaker 3: You guys are in the no landing camp.

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Speaker 2: Do you think what's going on with momb markets a

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Speaker 2: recent relentlessly resilient string of data.

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Speaker 3: Does that just bolster that view for you?

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Speaker 1: Yeah. And I think we not only have all the

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Speaker 1: general economic work. We have the top research team in

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Speaker 1: the business. They do a great job, Candish Bounding Plant

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Speaker 1: leading them and all the colleagues around the world. But

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Speaker 1: we also have as sixty million American consumers, and so

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Speaker 1: we think about the US economy, have great insight on

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Speaker 1: what's going on. If you look at that consumer spending

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Speaker 1: this year, the month of October so far versus last year,

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Speaker 1: or third quarter versus last year's third quarter, it's up

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Speaker 1: in a four to five percent range, which is consistent

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Speaker 1: with a low inflation, low growth economy. That's across about

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Speaker 1: a trillion and a quarter dollars to twenty and a

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Speaker 1: half dollars spent in a quarter, So it's a big

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Speaker 1: sample and the people moving around, they spend it each

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Speaker 1: quarter on all different things, but generally growing consistent where

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Speaker 1: we were pre pandemic, when you had fed funds rate

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Speaker 1: at the two percent level of two and a half

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Speaker 1: percent level, you had inflation and control, and you had

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Speaker 1: growth in the two percent level. So that that gives

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Speaker 1: us confidence that our experts to do all analysis are

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Speaker 1: backed up by the data we see in our clients.

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Speaker 3: And that's what we see for the consumer. Is there

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Speaker 3: of a degree of bifurcation the demographically.

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Speaker 1: It's less about bifurcation, because I'd assume that they're sort

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Speaker 1: of too. It's look inflation hits people in the lower

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Speaker 1: income brackets more than it does others. Because but the

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Speaker 1: good news is gas prices have come down food prices

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Speaker 1: have tipped over inflations and controls down in the three

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Speaker 1: percent range as opposed it was running pretty hot, and

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Speaker 1: so that helps. But if you have that debt and

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Speaker 1: you want to get a new car, that debt is higher.

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Speaker 1: If you have mortgage debt and you already had a

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Speaker 1: mortgage loan, it's very low. And so it really depends

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Speaker 1: on the consumer and really where they are. But the

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Speaker 1: average American consumer has more money than they did before

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Speaker 1: the pandemic, is in better credit quality before the pandemic,

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Speaker 1: still has the money and accounts from some of this

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Speaker 1: stimulus in the pandemic and is spending money. And that's

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Speaker 1: all good stuff for the US economy because we're such

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Speaker 1: a consumer. That's a unique thing about it's a consumer

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Speaker 1: driven economy, it's a consumer et economy.

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Speaker 2: Are you thinking about making allocations or allowances with stress

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Speaker 2: at this point?

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Speaker 1: We always do that. So every quarter we run stress tests,

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Speaker 1: you know, thousands of them every day. We run them

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Speaker 1: into the market's business stuff. We always look at it

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Speaker 1: and so what's the case if it turns out the

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Speaker 1: wrong way. So even how we set our reserves, we

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Speaker 1: have a modeled series of cases we put in so

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Speaker 1: it's not all base case based cases about half and

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Speaker 1: the rest are stress cases and the atom all together.

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Speaker 1: We're actually set our reserves as if unemployment was going

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Speaker 1: to be a five percent at the end of next year,

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Speaker 1: not what the market predicts at four point three. So

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Speaker 1: there's a conservativesm built in to that, and then we

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Speaker 1: look beyond that.

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Speaker 3: Those are some.

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Speaker 2: Potential complications for the FED depending on what happens in

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Speaker 2: just under two weeks time. Right does the fiscal scenario,

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Speaker 2: particularly under another Trump administration, but also certainly there are

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Speaker 2: risks when it comes to the Highers camp as well.

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Speaker 2: Is that something that you're thinking about?

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Speaker 1: So I would separate a very near term question of

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Speaker 1: the FED getting the trajectory. Our experts have them cutting

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Speaker 1: again a couple more times this year, one hundred basis

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Speaker 1: points this year, and another one hundred basis points more

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Speaker 1: evenly spread a quarter each quarter next year, and gets

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Speaker 1: to three to three point twenty five as a terminal rate,

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Speaker 1: and then inflation comes down to the two point three

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Speaker 1: percent as a move in the twenty five and the

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Speaker 1: twenty six, and so that is a well engineered FED change,

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Speaker 1: and so the dangers that data or they go too

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Speaker 1: fast or too slow, and that risk is higher now

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Speaker 1: than it was six months ago. And so as they move,

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Speaker 1: everybody's going to watch them. And you see the self

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Speaker 1: in territories one day and you see the rally the

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Speaker 1: other day. Everybody's going to watch all that. That is

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Speaker 1: completely different from and I don't think that'll be impacted

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Speaker 1: by the elections. All the fiscal problem United States, And

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Speaker 1: to give you the sound bite, the US just finished

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Speaker 1: the fiscal year. The budget deficit for that year was

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Speaker 1: equal to the entire economy of the country of Australia

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Speaker 1: one point eight trillion dollars. So think about the size

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Speaker 1: of that. And we've got to get back in line.

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Speaker 1: These are good times and we should be managed it

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Speaker 1: more carefully. And you know, frankly, we need to have

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Speaker 1: the politicians to set those budgets, fund those budgets, and

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Speaker 1: run tax policy against those budgets. To figure out how

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Speaker 1: to make this work. It's probably gonna be raising revenue

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Speaker 1: and cutting expense or some combination. It's not a new problem,

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Speaker 1: but it's one we got to start to wrestle with.

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Speaker 1: Not that it's critical tomorrow morning, but it will be

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Speaker 1: critical over the next few years.

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Speaker 3: But given that risk, Do you think the FEDE went

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Speaker 3: too big too soon.

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Speaker 1: No, they were late to the game and they admit that.

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Speaker 1: So it's nothing that we're saying. It's they were late

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Speaker 1: and they had to move fast because inflation got ahead

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Speaker 1: of them and they and they've done a good job

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Speaker 1: of bringing it back down from probably a double digit

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Speaker 1: rate down to about three percent last quarter three and

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Speaker 1: a quarters. They're getting close to it. And it's never

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Speaker 1: you know, the inflation average from if one of my

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Speaker 1: teammates told me from nineteen ninety twenty twenty four was

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Speaker 1: two and a half percent. The inflation average from ninety

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Speaker 1: from two thousand twenty two and a half percent. It's

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Speaker 1: four and a half percent just in the last twenty

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Speaker 1: twenty to twenty four. And so we've got to get

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Speaker 1: back in line. And so they're on that path. They

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Speaker 1: were late to the game. They've got to make sure

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Speaker 1: they don't go too hard now. And that's what they

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Speaker 1: are all trying to figure out watching the data. But

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Speaker 1: whether it's it's a terminal rate, that's the key, and

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Speaker 1: that we think is around three percent. That's a whole

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Speaker 1: different indust rate environment in the US and other markets

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Speaker 1: than it's been in the last fifteen years or so.

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Speaker 1: We haven't come close to that level of front end

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Speaker 1: rate in a long time. And if that's what is done,

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Speaker 1: that'll make that's a better place for us to be.

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Speaker 2: Frankly, during the most recent earnings you said you'd provide

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Speaker 2: guidance when it comes to that interest income for twenty

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Speaker 2: twenty five next quarter.

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Speaker 3: What data points are you waiting on at this point?

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Speaker 1: The difference of a FED cut or not mean three

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Speaker 1: or four hundred million dollars a quarter? Four said stuff,

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Speaker 1: So when they come, how fast they come, and all

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Speaker 1: that stuff, and then also just getting closer to the

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Speaker 1: the near term. We try to if you predict, we

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Speaker 1: try to stay what's really relevant vesters, which is the

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Speaker 1: near term path, the long term path, we have about

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Speaker 1: a two point zero zero percent one point ninety three

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Speaker 1: percent margin. That's a percentage spread that should move back

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Speaker 1: to two point two to two point three. That'll happen

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Speaker 1: over time. The path that will be determined by all

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Speaker 1: the different things going on in the environment around us.

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Speaker 1: But we are growing, and I not very many people are.

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Speaker 1: So we grew from the second quarter to the third

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Speaker 1: quarter in total. People who grow from third quarter to

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Speaker 1: fourth court. That's unusual. Most people are flat to down.

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Speaker 1: You're and we're starting to grow.

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Speaker 2: We really strong numbers both on income and on margin.

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Speaker 3: Is that sustainable, well.

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Speaker 1: Yes, and that we're actually running up margins that are

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Speaker 1: actually underneath our typical margins larger because the the editsted

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Speaker 1: income has to spread back out and so as that

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Speaker 1: moves up, we can get back to operating leverage for

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Speaker 1: five years in a row where we had operating leverage

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Speaker 1: before the pandemic, and then a couple of years in

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Speaker 1: the pandemic, and then we picked it up for about

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Speaker 1: six or seven quarters. We've got to get back in

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Speaker 1: operating levers. How you grow in your revenue a little

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Speaker 1: bit faster in your compense's not a lot faster, just

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Speaker 1: a little bit faster. And as NI kicks in and

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Speaker 1: the loan deposits kick in, and a three point three

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Speaker 1: trillion dollars bounty, you know, that's what drives it. So

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Speaker 1: we earned about you know, six point nine billion after tax,

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Speaker 1: for one of the few companies has earned that much

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Speaker 1: money many years in the roads is our tenth year

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Speaker 1: earn more than fifteen billion dollars after tax. All good stuff,

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Speaker 1: but the Rowty is we still have a lot more

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Speaker 1: on these growth ahead of us.

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Speaker 2: What are you saying when it comes to deals confidence?

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Speaker 2: You know brought a capital market activity at the moment.

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Speaker 2: Do you feel like it's going to be an acceleration

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Speaker 2: into the end of the year or maybe a slow down.

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Speaker 1: I just for the deck. Capital markets are aggressive, strong,

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Speaker 1: and there's a lot of issue. What's going on. We

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Speaker 1: just issue today and everybody that's going on the equity

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Speaker 1: capital markets some good views of what some IPOs are

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Speaker 1: getting done. You're starting to see it set up. It

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Speaker 1: appears the IPO calendar will be strong for profit making

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Speaker 1: companies going public because the investors are sitting a lot

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Speaker 1: of cash and the IPOs over the last six twelve

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Speaker 1: months have worked. In other words, they come out to

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Speaker 1: the market and gone in the right direction. Therefore, investors are

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Speaker 1: getting confidence at the quality of companies and what they see.

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Speaker 1: We think there's a pretty good prospect for that on

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Speaker 1: a go forward basis. On M and A, it's it's solid,

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Speaker 1: but with a certainly around the world on regulatory policy,

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Speaker 1: getting deals done to pace at which you can get

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Speaker 1: deals done, and whether it's in Europe or the US

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Speaker 1: or other places. All this has slowed the activity down,

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Speaker 1: but our clients are sort of chomping the bit. They

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Speaker 1: see opportunity, They see opportunity to buy companies and increase

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Speaker 1: the quality of platform. And so there's a good pipeline.

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Speaker 1: It's just that we've got to make sure that it

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Speaker 1: gets done.

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Speaker 2: And the central bank cycle certainly helps in restoring some

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Speaker 2: of that confidence.

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Speaker 3: Right, what about politics, So do.

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Speaker 2: You get a sense that maybe people are staying by

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Speaker 2: the sidelines now until the outcome post November is better

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Speaker 2: better zone?

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Speaker 1: I think if you think about what's really affecting the

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Speaker 1: small medium sized business the United States and other countries

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Speaker 1: as you had this rapid increase in rates, Because the

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Speaker 1: US has a fixed income, a fixed mortgage market, it

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Speaker 1: really doesn't affect landowners act quickly. It takes time to

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Speaker 1: get through that. Auto loans go up, credit cards go

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Speaker 1: but they're already pretty healthy rates. So it does affect

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Speaker 1: consumers on the rate structure when it goes up, confidence wise,

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Speaker 1: opportunity wise, it really affects small medium sized businesses. If

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Speaker 1: your base rate, so for was fifty basis points and

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Speaker 1: now it's five and a half, that difference is all

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Speaker 1: cost of funds for them to borrow, so that's had

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Speaker 1: more of a damper und their activity than anything else.

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Speaker 1: Are they waiting for election to get done so they

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Speaker 1: can figure out what the policy is going to be

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Speaker 1: under whatever administry? It's going to be a new administration.

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Speaker 1: Frankly on both sides, right, because yeah, even though vice

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Speaker 1: president here was a vice president, now shield be president

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Speaker 1: or Donald Trump has been out office for four years too,

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Speaker 1: we back being president. So both those policy platforms are

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Speaker 1: not well understood by businesses. But the big driver of

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Speaker 1: their reluctance has been waiting to make sure final mand

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Speaker 1: state in waiting to make sure the rates structure came

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Speaker 1: down for their activity. So they're not using their lines

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Speaker 1: as aggressively they were in normal times. And that's part

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Speaker 1: because the costume is higher, so you're going to be

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Speaker 1: more sure of the outcome. Are they investing capital, Yes,

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Speaker 1: but not as strong as they will as the rate

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Speaker 1: structure comes down.

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Speaker 2: Shi and Bristol's reply, or is that in the background?

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Speaker 2: Now do you think if the libmarkle holds up, it's

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Speaker 2: going to be okay?

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Speaker 1: Yeah? With an unemployment rate at four percent plus four

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Speaker 1: to one, with a wage growth rate of three percent,

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Speaker 1: and with inflation down around three percent, it is really

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Speaker 1: hard to have an economist convince the world that there's

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Speaker 1: going to be a recession. Now, none of that takes

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Speaker 1: an account. All the prey to horror was it could

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Speaker 1: go on a given day. The escalation of physical wars,

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Speaker 1: trade wars, bad policy of the fiscal situation in countries

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Speaker 1: percolating more. Those are all things that could happen. But

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Speaker 1: if you look at it from the standpoint United States,

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Speaker 1: people are working, they're getting paid, and they're spending money.

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Speaker 1: And that's a virtuous circle because when they spend money,

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Speaker 1: that means people are working, and so that's pretty good.

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Speaker 1: And we've resorted a lot of workers over the last

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Speaker 1: few years and put them to work. So it is

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Speaker 1: hard to particular recession with this low unemployment and a

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Speaker 1: much wage growth. That doesn't mean it can't happen fast.

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Speaker 1: If people lose confidence. Business is confidence. So what you

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Speaker 1: should be watching is consumer confidence, small business confidence, and

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Speaker 1: they're solid. Although they came down a little bit and

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Speaker 1: then when they cut rates the consumer went up a

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Speaker 1: little bit. The small business is still hanging in there.

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Speaker 1: So let's let's watch that play out of the next

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Speaker 1: few months. If they get confidence at the cost of

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Speaker 1: capital for them from a dead side is coming down,

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Speaker 1: you know they'll move.

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Speaker 3: Faster, do you.

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Speaker 2: We talked a little bit around politics and the election.

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Speaker 2: Have you spoken at length with either candidate.

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Speaker 1: We give our advice to everybody, so you know, I

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Speaker 1: think people always ask me, you know what about this,

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Speaker 1: or you have a desk drawer for candidate A or

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Speaker 1: desktrayer for Cneory. We can't do that. Our company's been

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Speaker 1: around since the seventeen eighties, so as I say, there's

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Speaker 1: been a lot of tough elections in the United States

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Speaker 1: since then, including that one in eight two hundred, which

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Speaker 1: they made a great play about called Hamilton. I mean this,

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Speaker 1: this is the United States goes through this every four years,

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Speaker 1: as your country goes through every three years. It's just

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Speaker 1: part of what we do. Is this one different, Everyone's different,

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Speaker 1: and our job is to advise the candidates before and

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Speaker 1: after as to what the best policies are for the

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Speaker 1: good of the American economy, in a good of America's

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Speaker 1: role in the world. And we'll do that. We've been

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Speaker 1: doing that for years. As CEO, I've worked with even

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Speaker 1: before I CEO, I've worked with President on task. Over

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Speaker 1: the course of time, we'll continue to do.

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Speaker 3: A lot of your peers have endorsed a candidate. Do

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Speaker 3: you have a view whose policies might be better for

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Speaker 3: the economy.

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Speaker 1: We'd have a view of that, but it has nothing

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Speaker 1: to do with the doors of candidate. We the United

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Speaker 1: States have to focus on the debt situation we talked about.

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Speaker 1: We have to create the conditions of growth in the

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Speaker 1: core industries we have. And that's not only good for

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Speaker 1: the United States, it's good for the world. If United

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Speaker 1: States and solid conditions, the rest of the world can

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Speaker 1: adapt to that. And because the size of our consumer

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Speaker 1: economy helps arrest the world, the size of our business

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Speaker 1: economy helps arrest the world, and we're codepend on them.

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Speaker 1: They help us, we help them. So I think I

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Speaker 1: wouldn't get into that. It's always the problem that if

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Speaker 1: we say someone's good and someone's bad, somebody overreads what

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Speaker 1: it is. So our job is stay out, let the

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Speaker 1: American people decide, and then we'll go work to make

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Speaker 1: what's best for America and the world honestly.

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Speaker 2: And what's best for America is that you working within

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Speaker 2: an administration, I know you get asked this all the time,

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Speaker 2: but is that something that is still an open door.

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Speaker 1: Our job is to get the private sector and to

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Speaker 1: keep driving what we're working here in Ralia with the

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Speaker 1: Sustainable Markets Initiative that work on the auspices of King Charles,

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Speaker 1: and we worked with him with a bunch of private

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Speaker 1: sector CEOs to help move the transition faster on a cooperative,

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Speaker 1: coalitional willing basis. Our jobs to work with others and

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Speaker 1: other types of settings to do that. So I do

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Speaker 1: love what I do and I'll keep doing it as

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Speaker 1: long as they'll have me.

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Speaker 3: It's a big week for Australia.

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Speaker 2: We've got both the Royals and Bryan you in town

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Speaker 2: as well. But I'm glad you talked about the Sustainable

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Speaker 2: State Sustainability Initiative because this has felt like a year

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Speaker 2: that's been quite depressing when it comes to that energy transition.

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Speaker 2: Do you know from where you sit, where do you

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Speaker 2: view the impetus here?

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Speaker 1: I would not argue with you that because that's what

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Speaker 1: you read and feel, But the reality is the work

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Speaker 1: that's going on because the commitments companies have made and

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Speaker 1: them living up and driving those commitments, server people sort

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Speaker 1: of divorce what you're seeing in as the AI Revolution hits,

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Speaker 1: all these initiatives to use clean energy or even nuclear

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Speaker 1: clean nuclear energy and restarting you know, nuclear plants or

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Speaker 1: small body of the nuclear or solar or wind. You know,

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Speaker 1: all these activities are going on strong and so well,

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Speaker 1: you know, well people are debating about this and more

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Speaker 1: of the public domain. Meanwhile, you've gone from literally three

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Speaker 1: or four offshore windmills operate in the United States to

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Speaker 1: about fifteen or twenty now and move and a bunch

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Speaker 1: of them approved and they're going on the ground. We

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Speaker 1: do we do several billion dollars of tax credit deals

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Speaker 1: in the United States. So the investment rate today, the

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Speaker 1: financing rate. We committed to train and a half dollars

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Speaker 1: to fund around a trillion dollars to fund around the

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Speaker 1: environmental change for about four hundred million. Our clients are

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Speaker 1: demanding it. That activity is going on, and they're all

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Speaker 1: working a thousand different ways on driving it. And so

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Speaker 1: I think despite the debate about you know, the public

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Speaker 1: setting and stuff, we believe that oil and gas and

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Speaker 1: things like that are critical, and we believe that green

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Speaker 1: energy is critical, and we've got to make it all

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Speaker 1: work together. In a country like Australia has that. You're

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Speaker 1: seeing it play out in front of the page of

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Speaker 1: papers with the energy somem of going on. It's that

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Speaker 1: classic dog. We got to keep good energy. We've got

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Speaker 1: to keep good power to keep the economy is going.

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Speaker 1: At the same time, we've got to make a transition,

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Speaker 1: and the private sector is driving that. So I don't

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Speaker 1: get to press at all. The amount of activity I

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Speaker 1: see is unbelievable.

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Speaker 2: I want to know how much you can sustain that

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Speaker 2: energy for in terms of being, of course already one

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Speaker 2: of the longest held roles on Wall Street, and you've

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Speaker 2: been around for a long time and also happy Bertha.

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Speaker 2: I know that you turn sixty five this month. How

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Speaker 2: long do you plan on sticking around for for CEO.

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Speaker 1: Well, I said you until the board. I serve the

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Speaker 1: on a day day basis for the board, and my

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Speaker 1: planners will continue to working for a substantial period of

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Speaker 1: time here to help the team along. But the real

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Speaker 1: job I have is to continue to build a team

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Speaker 1: that will succeed me, because this company is.

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Speaker 3: True about succession. Can you give us any names?

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Speaker 1: Oh no, you wouldn't do that. That's not for public consumption.

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Speaker 1: But we have a plan, and we work on it

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Speaker 1: all the time, and it abbs and flows and people

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Speaker 1: come in and out. But the idea is, it's not

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Speaker 1: just the CEO, it's the whole management team, and who

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Speaker 1: will be there for that CEO to rely on to

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Speaker 1: like and drive the company forward. And so we're here

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Speaker 1: for a moment in time. Our company's been here for

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Speaker 1: two hundred and forty years almost, and so it'll go

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Speaker 1: on for another several hundreds and hundreds of years. And

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Speaker 1: so the idea is, we moved the woodpile and hopefully

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Speaker 1: met left a little bigger, and we got to leave.

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Speaker 1: One of the pieces that's got to be bigger is

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Speaker 1: another management capability across not only the CEO, but the

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Speaker 1: rest of the team.

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Speaker 2: One last question, speaking of stalwarts, Warren Barfett continues to

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Speaker 2: reduce his dake in Bank of America.

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Speaker 3: Have you spoken to him?

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Speaker 1: No, it's because it wouldn't be right to speak to

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Speaker 1: him about his share ownership when he owns that much

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Speaker 1: of the company. But he's been a great investor. He

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Speaker 1: invested seven hundred million dollars or seven hundred million shares

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Speaker 1: in twenty eleven and bought another three hundred million and

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Speaker 1: I think he isn't talking about it. We wouldn't talk

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Speaker 1: about it, but he's been a great support of our

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Speaker 1: company and we benefit by that support.

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Speaker 2: Brian, so great to have you with us, and thank

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Speaker 2: you so much for joining us here in Sydney. Brian Wonahan,

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Speaker 2: who's a chairman and CEO at the Bank of America