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Speaker 1: For our Bloomberg radio and television audiences worldwide. We are

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Speaker 1: joined now by Brian Moyne, and he is shared and

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Speaker 1: CEO of Bank of America. Brian, thank you so much

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Speaker 1: for joining us here at the end of the year.

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Speaker 2: David, it's great to have you here in happy holidays,

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Speaker 2: and you can see our teammates out there working away

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Speaker 2: on the trading floor here at one Brian Park.

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Speaker 1: Yeah, and we're going to go back to the trading

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Speaker 1: floor because you had quite a year in trading. But

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Speaker 1: first talk about the year. Overall, there have been a

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Speaker 1: fair number of surprises given what some people expect at

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Speaker 1: the beginning of the year. So the stock mark has

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Speaker 1: done very very well. We had more interest rate hikes

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Speaker 1: than we thought we would have. Unemployment has really held

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Speaker 1: down pretty well, and we didn't have that recession so

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Speaker 1: many people thought we would. Now, I must say, when

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Speaker 1: I talked to you throughout the year, you kept saying

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Speaker 1: it kind of looks pretty strong. Some of your compatriots

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Speaker 1: were saying, oh, no, hurricanes and tornadoes and things like that.

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Speaker 1: So how'd you get it right?

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Speaker 2: Well, we just we just try to follow the data,

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Speaker 2: and I think they were unexpected events. They're unexpected events

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Speaker 2: in every year, you know, and so whether it's the

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Speaker 2: regional banking crisis early on in the year, or whether

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Speaker 2: it was another Hamas attack on Israel and October seventh,

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Speaker 2: whether it was escalation and continuate Ukraine, whether it's attentions

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Speaker 2: in China. These are all things that happen and they

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Speaker 2: go on all the time. But what we look at

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Speaker 2: is what goes on in our core customer base and

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Speaker 2: we try to talk about what is going on as

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Speaker 2: opposed to what could go on and plan for what

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Speaker 2: could go on. And you know, that's been relatively strong

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Speaker 2: and our team. You know, the spending continues even today

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Speaker 2: at about four to five percent over last year half

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Speaker 2: through growth rate of twenty two to twenty one, showing

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Speaker 2: the consumer has slowed down, consistent with inflation getting under control,

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Speaker 2: consistent with you know, the FED using the rate structure

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Speaker 2: to choke off some of the activity. And it's happened.

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Speaker 2: But overall it's been a decent year and the economy's

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Speaker 2: grown on, employment stayed low, and the bank's done very well.

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Speaker 1: Let's talk about the consumer. You are the largest consumer

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Speaker 1: banking operation in the country. We are in the middle

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Speaker 1: towards the end now the holly season. What are you

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Speaker 1: seeing there? I knew until now I was holding up

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Speaker 1: pretty well. Where is it right now? The consumer as

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Speaker 1: of today?

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Speaker 2: Sure so if you looked at it November of twenty

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Speaker 2: three over November of twenty two, and this is across

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Speaker 2: about three or four hundred billion dollars a month of activity,

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Speaker 2: customer spending money out of their accounts. That was about

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Speaker 2: four and a half percent so far in December's holding

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Speaker 2: about the same. And again that's about half the rate

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Speaker 2: it was growing at last year at this time versus

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Speaker 2: the year prior. And that's because the overactivity is slowing down.

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Speaker 2: What's been interesting is this broadened out to all things.

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Speaker 2: There were these periodic things since a pandemic. First people

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Speaker 2: hold up and bought stuff of their house. Then they

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Speaker 2: started to go out and travel some. Then they went

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Speaker 2: to restaurants. Then they had another set of travel, different

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Speaker 2: kind of travel, international travel, and then they got to

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Speaker 2: concerts and things. That's all through the system, and now

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Speaker 2: you see it's spending kind of evenly across. Retail stores

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Speaker 2: are doing fine, Online sales are strong, you know, they're

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Speaker 2: all you know, two three percent flatish to four percent

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Speaker 2: depending on what it is. So everything's kind of normalized

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Speaker 2: for the US consumer and how they're spending money. They

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Speaker 2: are in very good shape. They have money in and accounts,

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Speaker 2: they're employed, and the wages are growing. It doesn't mean

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Speaker 2: inflation didn't affect certain parts of the American public hard,

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Speaker 2: but in general, when unemployment rate's still in the mid

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Speaker 2: threes to mid ubber threes, that is a very strong

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Speaker 2: place for the consumer.

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Speaker 1: But it has slowed down, and you say they're in

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Speaker 1: good shape. That's why I was going to ask you,

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Speaker 1: they're spending money, can they afford it? What are you

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Speaker 1: seeing in terms of their bank balances? I believe those

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Speaker 1: have come down some How fast are they coming down?

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Speaker 2: So it's a little bit of two different types of customers.

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Speaker 2: For consumers that had a lot of access cash. Of course,

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Speaker 2: when the rate they could get on that cash one

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Speaker 2: from twenty five basis points to five percent plus, guess

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Speaker 2: what it did. It moved the market. So the very

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Speaker 2: upper balances of consumer and our wealth manager customers move

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Speaker 2: the market. But if you look at the consumers that

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Speaker 2: the accounts are more than money come in and out,

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Speaker 2: they're still sitting with multiples of what they had pre pandemic.

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Speaker 2: So a cohort of consumers that had between two and

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Speaker 2: five thousand dollars in their account's pre pandemic average about

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Speaker 2: thirty two to thirty four hundred. They're now still sitting

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Speaker 2: with about thirteen thousand accounts. It has come down from

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Speaker 2: a peak of thirteen four down to about twelve eight,

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Speaker 2: so it's come down a bit, but still much higher

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Speaker 2: than it was before. That's due to all the stimulus

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Speaker 2: and stuff. And then you know, holding on to that.

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Speaker 2: Where they go next is going to be launching question.

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Speaker 2: They've slowed down their spending because things got more expensive.

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Speaker 2: They slow down their spending because they got worried a

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Speaker 2: little bit, worried about their job. They slowed down their

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Speaker 2: spending because the rates on car loans or all the

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Speaker 2: things became more expensive. But they're still spending more than

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Speaker 2: they did last year. And that's a decent setup for

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Speaker 2: a soft landing.

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Speaker 1: Are you seeing any softness and consumer credit? I mean,

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Speaker 1: are you're seeing balances go up, delinquencies go up?

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Speaker 2: Well, Bounce has gone up in credit cards back to

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Speaker 2: where they were pre pandemic for us in the industry,

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Speaker 2: and people are like, oh my gosh, you're up above

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Speaker 2: that even that, but if you adjusted for the size

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Speaker 2: of the economy, they're actually still down, and so the

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Speaker 2: consumer capacity bar is strong. Mortgaged mortgages are all locked

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Speaker 2: in at low rates that the best asset for a

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Speaker 2: lot of households is actually their low interest cost liability.

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Speaker 2: It's mixing two different things on a balance sheet, but

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Speaker 2: the reality is is three percent mortgage is an asset

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Speaker 2: for people right now because it means their payments haven't moved,

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Speaker 2: so that's good news. The home equity barings are down

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Speaker 2: for US from thirty billion to twenty some billion. That

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Speaker 2: means that they're not using that equinor house enters more

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Speaker 2: equin in your house. On the credit cards, the delinquencies

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Speaker 2: are really consistent within nineteen and everybody says, well, it's

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Speaker 2: back to nineteen was one of the best credit years

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Speaker 2: in the company's history, in the industry's credit history. So

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Speaker 2: that's a very strong place, and so we feel good

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Speaker 2: about consumer credit. And as long as the employment levels

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Speaker 2: stay there, it's a little hard to believe that you'd

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Speaker 2: have it now. Lower FICO scores, you hear people talk

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Speaker 2: about a little more noise, but the general consumer is

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Speaker 2: basically a prime borrower, and they're doing fine.

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Speaker 1: What about the commercial side, You're very big in middle market,

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Speaker 1: smaller and medium sized enterprises. Is their loan demand? What's

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Speaker 1: the sentiment there?

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Speaker 2: So, you know, if you think about the consumer, we

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Speaker 2: keep growing customers, keep growing house or keep growing this company.

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Speaker 2: If you think about in the commercial we keep growing customers.

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Speaker 2: Know more logos as that our teammates called companies that

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Speaker 2: we do business with a record number this year. The

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Speaker 2: thing about it is they're not using aligns as much.

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Speaker 2: So the loan balance growth on the commercial side has

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Speaker 2: been a little bit sluggish, little bit flatish. Looks like

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Speaker 2: it bounce around on low single DIGITSUS quarter. Now, why

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Speaker 2: is that happening? Line usage before the pandemic for middle

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Speaker 2: market clients was forty percent, dropped to thirty percent, got

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Speaker 2: back up to thirty six percent, and then fell a

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Speaker 2: cup hundred basis points. Why would companies borrow less at

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Speaker 2: this point? They're worried about final demand. It's also a

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Speaker 2: lot more expensive, So the FED is having the impact.

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Speaker 2: Which is a loan that was like three percent four

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Speaker 2: percent is now seven to eight, you know, seven to

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Speaker 2: eight percent. People think about using it so the line

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Speaker 2: uses is down, meaning that not beings aggressive buying equipment

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Speaker 2: or hiring people or extending inventories, mostly because they're worried

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Speaker 2: about the economy slowing down. And when we say a

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Speaker 2: soft landing, it doesn't mean the economy goes into recession.

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Speaker 2: It says no. But what our team is saying, Candabs, Browning,

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Speaker 2: Plot and researching is that we're slowing from almost a

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Speaker 2: four to five percent growth rate to one percent growth

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Speaker 2: rate is still a major slowdown and the business community

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Speaker 2: is wrestling with that right now, trying to get that

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Speaker 2: balance right.

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Speaker 1: One of the big surprises this year came toward the

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Speaker 1: end of the year with the FED decision and then

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Speaker 1: the news conference with Jpile that really signaled the least

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Speaker 1: to most of us. Yeah, they're really seriously considering rate cuts.

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Speaker 1: It looks like they're coming next year. Were you surprised

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Speaker 1: and why do you think they did it? Do you

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Speaker 1: think they're seeing data about the economy that is slowing

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Speaker 1: faster than we appreciate.

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Speaker 2: Yeah, so let's talk about our econdoms. Tell me and

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Speaker 2: we feed in. We have the number one research team

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Speaker 2: in the business and Canvas team do a great job

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Speaker 2: there Basically, they just shifted yesterday literally and they moved

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Speaker 2: to more rate cuts in twenty four, But the real

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Speaker 2: key was what do they see in the economy, And

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Speaker 2: they basically have moved from a half a percent growth

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Speaker 2: rate annualized for the first three quarters next year up

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Speaker 2: above one percent. They've softened their soft landing, let's just

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Speaker 2: say that. And by doing that, they've said when the

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Speaker 2: FED is seeing inflation slow as fast as it is,

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Speaker 2: they basically think we get down to the low twos

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Speaker 2: of inflation by the ear and next year twenty four,

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Speaker 2: and it carries into twenty five, the Fed needs to

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Speaker 2: bring the rate structure down. They're saying basically two hundred

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Speaker 2: basis points of rate cuts, one hundred next year and

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Speaker 2: one hundred and twenty five, which still leaves you at

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Speaker 2: three and a quarter to three and a half. Now,

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Speaker 2: the last time we were fundamentally at that rate structure

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Speaker 2: was almost was eighteen years ago by time we get there,

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Speaker 2: so we've had a long stretch of very low rates

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Speaker 2: except for what happened very recently, and so that fueled

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Speaker 2: a lot activity. And now the rate structure can be

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Speaker 2: fundamentally higher. It's more structurally sound and the Fed is

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Speaker 2: pivot is it's not really pivot to say we got

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Speaker 2: to normalize this because we're seeing the economy and fflation

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Speaker 2: come in. Not done yet, but all educations are doing

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Speaker 2: there and everything we can see that consumer spending is

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Speaker 2: consistent with a two percent inflation economy. That level of

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Speaker 2: spending growth in our customers was where it was in

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Speaker 2: seventeen eighteen nineteen when the FED raise rates to bring

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Speaker 2: the economy back and sink.

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Speaker 1: So the stock market did pretty well this year up

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Speaker 1: until that Fed decision, and then it's off to the

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Speaker 1: races since then. Your trading desk has done particularly well

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Speaker 1: this year to give us a sense of where it

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Speaker 1: is right now, are you going to finish the year

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Speaker 1: as strongly as you have been going this quarter so far?

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Speaker 2: Well, you can from your lips to their ears. So

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Speaker 2: they've got a few weeks left now. They're doing fine.

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Speaker 2: We said that they be up up year every year,

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Speaker 2: which is kind of countered the trend in the market.

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Speaker 2: They've Jimmy Demorrow the team have done a great job.

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Speaker 2: And what's interesting, it's rounded out and it's fixed income,

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Speaker 2: it's equities, and it's much more consistent. They've I'm not

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Speaker 2: quite sure it's exactly true, but basically have made money

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Speaker 2: every single trading day this year, and so there's been volatility,

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Speaker 2: there's been news, there's been this, and that's because they

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Speaker 2: have a balance and a business in a way that

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Speaker 2: goes through. We increase the size of the business three

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Speaker 2: or four years ago under Tom Montag's leadership and Jimmy's leadership,

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Speaker 2: and that's born fruit and they are keep gaining market

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Speaker 2: share and they're doing a great job.

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Speaker 1: So I'm glad you raised because three or four years

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Speaker 1: ago I was here with you at Back of America

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Speaker 1: and you said, you know what, you're going to have

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Speaker 1: to devote more capital, more people into that business. You

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Speaker 1: did it. You seem you're having success going forward. Is

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Speaker 1: there yet more capital that you're going to allocate into trading?

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Speaker 2: Yeah, as long as they can get the returns. You know,

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Speaker 2: at the end of the day, our return on equities,

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Speaker 2: you have fifteen percent of the company. This business because

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Speaker 2: all of regulations in the capital is a little lower

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Speaker 2: than that, but is well bubber cost of capital. As

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Speaker 2: long as they can keep deployment, We'll keep pushing capital

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Speaker 2: because it's a great business in great format and we're

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Speaker 2: gaining market share honestly across the world, and it's a

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Speaker 2: global business so it can access much deeper client base.

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Speaker 2: And team's done a great job, so they'll keep getting

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Speaker 2: more commitments consistent with them being able to get the

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Speaker 2: returns on them.

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Speaker 1: One last one, Brian, are you concerned at all of

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Speaker 1: the markets maybe overreacting to what they heard from Chirpa.

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Speaker 2: I think he's got this challenge that you know he was,

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Speaker 2: you know, the FED in our own mission it was

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Speaker 2: late to cutting off inflation. Now he'd be a careful

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Speaker 2: not to be late to stop cutting off inflation, and

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Speaker 2: the market's gonna have and flow. But I think people

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Speaker 2: have to be a little careful. This is trading talk.

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Speaker 2: This is you know, the ten year moving around between

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Speaker 2: f you know, three ninety and four fifty four seventy y.

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Speaker 2: It's not the real economy. Real economy is still heavily

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Speaker 2: impacted by the overall rate level is very restrictive, and

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Speaker 2: it's still coming through the system. Against that, we still

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Speaker 2: have a lot of stimulus coming through the system, you know,

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Speaker 2: the infrastructure, build a chipsack, the IRA, those are all

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Speaker 2: still coming through the system. So that's a tuggle where

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Speaker 2: he's up against it, but overall it we believe he's

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Speaker 2: engineer soft landing through the interest rate parent.

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Speaker 1: Brian, thank you so much. As Brian moyhan, he's chair

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Speaker 1: and CEO of Bank of America,