Bank of America Chairman & CEO Brian Moynihan Talks Consumer Strength

**Brian Moynihan** (0:02)
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**SPEAKER_2** (0:07)
I want to get to a big interview now. We've got Bloomberg's Dani Burger with Bank of America CEO Brian Moynihan. They are live from the Forbes Iconoclast Summit, just a little southwest of where we are here in New York City. Dani.

**Dani Burger** (0:22)
Thank you very much. That's right. I am here with Brian Moynihan of Bank of America. Brian, thank you so much for sitting down with me.

**Brian Moynihan** (0:28)
It's great to be here, Dani.

**Dani Burger** (0:29)
I just want to start, one of the things you've been very consistent on so far this year, whether it be conferences or in your earnings, just the strength of the consumer and the strength on your platform. Spending on credit and debt up 6 percent year over year, and yet gasoline prices are high, consumer confidence is at rock bottom.
If those types of things can't break the consumer, then what if anything can at this point?

**Brian Moynihan** (0:51)
So I think just to give the stats, about $2 trillion goes from our consumers in the economy every year.
Excuse me, about $5 trillion. Year dates, $2 trillion plus, grown at 5 percent in the aggregate, debit card to card a little faster. And it's going everywhere. Now, when you watch within that, you start to see your point about what consumers do. They're going to the gas station more times in spending a lower amount because from budgetary basis, they want to spend that much. But they're still buying more in entertainment. It's up 13 percent year over year in the month of May. And so it's a little bit of conundrum. And why is that true? Go back to your question, what would break them? Unemployment, 4.3 percent, job formation, not as strong as theoretical numbers, but for the population growth, it's actually pretty strong at 60, 70,000 jobs a month. And so our team thinks we'll grow at 2.1 percent this year.
And people say, well, you're optimistic. I'm saying, I'm telling you what the consumer's doing today. But what they say they're going to do will come true if job cuts really come through to lower levels of employment. Right now, a lot of these job cuts are open positions and attrition and things like that. And not necessarily huge layoffs that are actually affecting because job numbers are going up.

**Dani Burger** (2:01)
Well, and on your earnings, you also noted, I think spending on gasoline was something up like 16%.

**Brian Moynihan** (2:05)
20-some percent.

**Dani Burger** (2:06)
Okay, 20-some percent. Is that something you're keeping an eye on?

**Brian Moynihan** (2:08)
Well, keep an eye on it. If you sort it by low, medium, and high income earning households, it obviously has about twice the impact of a lower third of income households than it does the medium or the higher. And so that's where you have to watch and make sure that they are able to carry that. And that's the people who go in the gas station more often still spending the $40. So they don't get as much gas for it, but they go more often and they ration how they spend it. They go to the places where gas is cheaper, let's just say that. And you can see people changing, micro-changing. They're going a little bit more to big box wholes retailers, little more second-hand stores, and all that adjustment is part of the K economy we talk about. But the reality is the incomes are growing for all those income segments. And so affordability is a real issue, but to fundamentally change affordability, we have to build more housing, so the supply pressure will bring the prices down.
Affordability gas prices at $4.50 or above, we've been there before, so it is affordable, it's just not pleasant.

**Dani Burger** (3:07)
Someone once made the comment to me, Meredith Whitney, as a matter of fact, basically said a lot of people are leaving the banking system that are especially on the lower income scale. They're turning to things like payday loans. She brought up the term shadow banking. I wonder if there is, or if you are concerned, maybe there is unseen stress in the system that has left the likes of a Bank of America.

**Brian Moynihan** (3:25)
When you look at the recent Fed data on consumer credit, the reality is that there are pockets of delinquencies that are a little higher for subprime credit. We as a company don't do that business. And our credit's as good as it's been in 50 years, and consumer sighting is getting a little better.
The flip of that, though, is we offer a set of products, a no overdraft account where you can't overdraft because you don't have checks, frankly, and what you do is all automated payments. We have a $5 a month account. We have a $500 loan where you pay no interest, no fees. You just have to pay it back. You can borrow it a couple of times a year. So we're always working on affordability of our products. And our overdraft fees are $10 versus the market of $35 for those that choose to have overdrafts. So we have an affordability package in banking that's second to none. And if you look at our consumers from the spending side, they look like everyone else. From the borrowing side, we tend to be more of a prime lender. So you'll see some pockets. Even those pockets. If you look at some of our peer companies that are in those businesses, the liquecies are fine right now. Everybody's worried about what happens next, but it all comes down to unemployment and people being employed and earning money.