Bank of America (NYSE: BAC) Chief Executive Brian Moynihan is entrenched in a press tour today, following the firm’s earning results and explaining the firm’s new direction.
Part of this new strategy and direction is incorporating the legislative changes that will change the way the firm does business. Moynihan commented during a CNBC interview today that “the new strategy will be less about selling products and more about deepening relationships with clients.” BofA, once regarded as the ‘neighborhood banking model’ had to abandon that somewhat in recent years, and turn from the kindly neighbor into a surly one. Charging high account fees, and seeking punitive charges on customers grew into part of their business. The changes are expected to result in additional revenue, and Moynihan added “Instead of charging penalty fees, we’ll charge monthly fees.” This may be of some concern to historically good customers who consistently made payments on time. Now that there is a cap on penalty fees along with a plethora of other caps, the costs that were once charged to the delinquent customers will now likely be diffused across the entire customer base.
“The idea is taking the fees away from a small group of customers … and spreading the fees,” Moynihan said. “We’ll change our checking accounts structure over the next 12 months.” The deposit business has not been profitable recently, and the firm seeks to change that as the banks seeks to provide fees and charges that are “more consistent” with its deepening relationship with customers. Retail banking, long a loss leader in the commercial banking world, is likely to receive a significant change: some analysts anticipate that banks will start charging fees for retail banking. This action could very well prevent millions of people from using financial institutions. In response to this concern, Moynihan commented: “Our goal is not to move people out of the banking system; our goal is a fair exchange. There’s no intention here to push people outside the banking system.”
Amidst growing concerns and business conditions, BofA impaired good will this quarter, but profit excluding this topped analysts’ expectations. The firm reported 27 cents per share earnings, compared to a consensus estimate of 16 centers per share by Thomson Reuters. Moynihan commented “One of the good things that you see in our results is that … our credit costs are down dramatically quarter on quarter. Consumers are healing. We can see the consumers continuing to push forward.” Apparently, as consumers heal, Moynihan and Bank of America want a bigger piece of their pie.
