BofA Needs Clear Growth Plan, Smarter Risk Taking: Mayo

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00:00So responsible growth, that's the stated strategy.

00:02Has it just run its natural course and he's extracted all he can from that idea?

00:06Well, you have to understand CEO Brian Moynihan of Bank of America took over after the global financial crisis

00:12and his main job was to steady the ship.

00:15I think Bank of America under Brian Moynihan have been great risk managers,

00:20but this decade they've not been great risk takers.

00:24So I expect them to lean in more to the growth part of their responsible growth theme.

00:31Got it.

00:31OK, so Bank of America's argument is that it's working on it.

00:34It's catching up right now.

00:35It's already made clear that interest income will be up 6% to 7% at the end of 2025.

00:41What do you hope to hear from B of A's management when they discuss all these targets on Wednesday?

00:46Well, I think the most important target is what do you expect to have for returns?

00:51Bank of America has a premium franchisor, number two in U.S. retail, number two in wealth management,

00:59top five global investment bank.

01:01That's really good stuff.

01:03So why have their returns only been 14% this decade?

01:06So I'm looking for a new return target of about 16% to 18%.

01:12So how they get there and how they put some meat on the bones for those growth strategies

01:16will be very important this Wednesday.

01:18OK, that makes sense.

01:19And you're referring to the return on tangible common equity.

01:22And right now, they've set a target, I guess, of the high teens.

01:28It's currently at around...

01:29No, they're currently Bank of America.

01:30I don't know of them to have any targets.

01:32So first of all, let's hear a target.

01:33Oh, excuse me.

01:34Analysts are expecting something.

01:36OK, so yes, I think 60% to 18% seems reasonable.

01:40But it's really the how they're going to get there is what's going to be important.

01:44And I think when it comes to traditional banking deposit taking, Bank of America has excelled.

01:51But for being such a strong bank, they've underperformed in terms of growth of the less

01:56traditional activities.

01:57Wealth management, credit cards, banking, trading, even total loan growth for the last

02:0215 years has lagged at Bank of America.

02:05So there's no skill in never taking risk.

02:08You don't want them going back to 2007 when they took too much risk.

02:12So this has been a risk-off company and a risk-going year, to explain the stock price.

02:19So I expect them to have more of an opportunistic risk mindset going forward.

02:23You've mentioned the areas where they have room to grow.

02:25Where is it already strong?

02:26Where is it kind of delivering already to them and to the way that it can, the maximum

02:30that it can?

02:31Well, wow.

02:32I mean, Bank of America's $1 trillion of retail deposits.

02:35I mean, those customers really love the service.

02:40And they have connections with automatic bill pay and all sorts of interactions.

02:46They've had $3 billion interactions with their Erica chatbot for the past decade.

02:51Talk about AI.

02:52So that's really working.

02:53The bread and butter, the raw materials of a bank or deposits, that's worked really well.

02:58The challenge and opportunity is to leverage those relationships to do more.

03:01Are we going to get any kind of insight into succession planning at Bank of America?

03:06They're going to showcase some senior executives below the CEO tier, according to our reporting.

03:10Well, to up the drama, and the bar is low for bank analysts, okay?

03:14It doesn't take much to have some drama.

03:16But they recently named two co-presidents, Dean and Jibby, as we know them colloquially.

03:23It'll be the first time we get to see those two individuals in their new roles.

03:26And they're overseeing jointly Bank of America's eight lines of business.

03:31So the question is, how are they going to instill extra intensity, growth, and accountability to those eight lines of business?

03:39And so it could be one of those two.

03:40Alistair, the CFO, is a very capable CFO.

03:45So I'd say it's a three-person horse race to become the next CEO.

03:50And this will be a chance to the investment world to analyze them.

03:54So is it overstating things to say that this Investor Day is crucial to B of A's future?

03:59You know, I think this is the right time for Bank of America's Investor Day.

04:01It's the first one in 15 years.

04:03So what is Bank of America's plan from now until the end of the decade?

04:07How are they going to improve their growth?

04:09How are they opportunistically going to take risk?

04:11How are they going to improve their returns?

04:13And lastly, with this world and their experience with AI and technology, how are they going to improve their efficiency?

04:19This should be one of the most efficient banks on the planet with all the tech and AI that they've done.

04:24So that will be really interesting to hear.

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