Bank of America Sheds $22 Billion in Value; Consumer Prices Ramp Up

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This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies and trends shaping today's complex economy. Plus, global business, finance and tech news as it happens. The Bloomberg Businessweek Daily Podcast with Carol Massar and Tim Stenovec.

Carol Massar (0:33)

Turmoil at B of A, pushing shares to their worst earnings day in more than a decade. Piling on the pain for a bank that's already been the worst performer among the six biggest US banks in the past five years. It's also a major black eye for CEO Brian Moynihan, the lawyer turned executive who has led the bank, Tim, for nearly two decades.

Tim Stenovec (0:51)

Shares of Bank of America trading lower after its earnings update showed stock and fixed income traders missed estimates. The bank's results also hurt by a charge tied to regulatory penalties over money laundering and sanctions violations.

Carol Massar (1:02)

Well right now we head to Charlotte, North Carolina, the home of Bank of America, and that's where CEO Brian Moynihan is sitting down with Bloomberg's John Farrow. John.

John Farrow (1:10)

We'll start here in New York. Carol, thank you very much, and thank you very much to Tim as well. I'm pleased to say that the Bank of America Chairman and CEO Brian Moynihan joins us now for more. Brian, welcome to the program. It's good to see you as always. There's a couple of different stories in the mix today. We've got to start with that chunky fine from Treasury, a big regulatory fine that we can address with you straight away this afternoon. The language from Treasury is quite damning, Brian. What's your interpretation of what went wrong here?

Brian Moynihan (1:33)

Look, at the end of the day, we had an examination a few years ago.

We got a cease and desist order. We have to do that work. This fine relates to that effort. They want us, there was a debate a bit about what exactly we had to do. That's resolved. It's behind us. The Billion 2 is going through. We've been expending the money in the run rate already to do the remediation because a few months ago, we started picking up the cost structure and putting it in. So we will get it done. We take it seriously. And I think as time goes by, people will understand it better.

John Farrow (2:07)

I imagine you want to draw a line under the whole issue, but just to extend the conversation on this particular topic just a little bit further, Brian, I imagine you also don't want to be drawn into how much of this has already been completed, what is left to really fix here. But I think for this afternoon, given where the stock is, there needs to be some confidence for investors that the costs associated with remedying this are in the baseline, and there won't be any more surprises in the future. How confident can investors be that that's the case?

Brian Moynihan (2:36)

For the operational cost to do the work, we've added a lot of expense, and it's in our baseline, and we're continuing to operate that.

And again, it's a few hundred million dollars in the quarter here, and so it's not of additional expense that we've been running through. So we've got an understanding, clear path forward. We've been completing a lot of tasks, frankly, over the last several months, and we'll continue to finish it up. It came a lot about how the thresholds are set and things like that. There's a lot of technical discussion about it, but at the end of the day, we understand what we need to do. We're doing it and we'll deliver it.

John Farrow (3:08)

Brian, could you take us inside the bank and just discuss accountability just a little bit? What are discussions like with the board around accountability? And would you be open to aligning remuneration with the resolution of some of these difficulties?

Brian Moynihan (3:23)

We have accountability for everything we do in a company, including a fine.

We've gone through before. In 2004, there was accountability for the examination, the order already taken. And so the board will decide that when we get to the end of the year.

John Farrow (3:38)

Brian, of course, this is overshadowing what was otherwise a mixed quarter for the bank. Trading, capital markets, investment banking, that's one side of the business. I actually wanted to start with the Main Street side of the business, which seems to be performing quite well. And I think otherwise we'd be talking about the fact that net interest income, the path for net interest income looks pretty good from here. Can we just sit on that for a moment, Brian? Do you see the path to that improving from here even more as durable?