NEW YORK (
Bank of America
(BAC - Get Report)
is ready to reverse a decades-long strategy of growth, honing in on the most profitable members of its massive customer base rather than adding new customers through acquisitions.
In fact, CEO Brian Moynihan said on Wednesday that the bank is looking to sell off more of its "lazier" assets. Bank of America plans to replace that income by drawing more from the sweet profit nectar of healthy middle-market consumers, and fast-growth areas outside the United States.
"That's the operating model: Serve consumers, companies, investors, user franchise, and get the most out of the middle," the recently-crowned CEO told investors at a financial services industry conference sponsored by
He characterized Bank of America's former business model as "a sales machine" that "measure[d] success on the number of products sold," often resulting in "too many products sold to customers which weren't working for them."
As a reflection of the change in philosophy, the firm recently changed its unpopular overdraft policy. Instead of allowing customers to overdraft their checking accounts using debit cards to purchase small items, then charging them a hefty fee, Bank of America will not allow the transaction to go through. Moynihan put it simply, by saying "the $35 cup of coffee" will be no more.
But Moynihan said the bank isn't giving up on fees -- it will be shifting them to other areas, including, perhaps, general deposits. That means all customers stand to get charged smaller monthly fees to make up for the big chunks of revenue that were coming from irresponsible Starbucks patrons.
At the same time, Bank of America is focused on whittling down the cost of those deposits. Over the past two years, it has brought down expenses to 2.29% of deposits from 2.57% by gently prodding customers to use self-service channels such as ATMs and online banking.
Those channels make up 70% of customer transactions now, vs. 62% in 2007. Over the past year customer deposits at the ATM have risen from one in four to one in three. Moynihan's goal is to raise ATM deposits by 67% this year, a strategy put in place last year when B of A started printing checks on ATM receipts and came out with a marketing push for more online and ATM transactions.