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NEW YORK (
Bank of America(BAC - Get Report) investors wondering when the incredible shrinking bank is going to start growing again are unlikely to have been encouraged by a presentation by CFO Bruce Thompson on Tuesday.
Speaking at an industry conference hosted by Morgan Stanley, Thompson sounded far more at ease talking about extensive efforts the bank has made to shrink its balance sheet and reduce risk than he did about growth prospects.
Investors wondering when the incredible shrinking bank is going to start growing again are unlikely to have been encouraged on Tuesday.
"We will reduce parent company debt by $40 billion this quarter alone," Thomson beamed. "If you think about what that means from an interest expense perspective going forward, in the third quarter which will be the first quarter that we fully recognize those savings, it'll be about $230 million of interest expense that we will have reduced the balance sheet by on a go forward basis."
That kind of talk really appears to get a CFO's juices flowing!
Thompson cited further progress the bank has made in strengthening its balance sheet. Bank of America increased its Tier 1 common equity--considered by many regulators to be the safest form of capital--to $132 billion at the end of the first quarter compared to $124 billion at the end of the first quarter of 2011. Over that same period, so-called risk weighted assets (RWA) shrank to $1.22 trillion from $1.43 trillion.
Some banking experts caution, however, that RWA can easily be manipulated.
At the end of his prepared remarks, Thompson threw in an obligatory line about "getting the people out on the front to start pushing and looking to find additional revenue generating opportunities."
During the question and answer session, however, Thompson rambled a bit as he talked about the bank's Global Wealth Investment Management and Global Banking and Markets areas. Both are currently being targeted for cuts, though it is in these areas when Thompson says management sees the best growth opportunities.
Thompson declined to answer a question about whether Bank of America is reducing its footprint in these areas, merely noting there had been "reports" on the subject and that management would have more to say in the future. He appeared to be alluding to a
Reuters report in April that
the bank is shopping its ex-U.S. wealth management business. .
Thompson tried--not very successfully--to finesse the point.
"Clearly the goal is as we continue to simplify the company and make it easier to get things done you would hope over time there's the ability to do better in those businesses because its an easier platform for people to work off of and easier to get things done at the same time being mindful that we're going to be prudent with the risks that we take."
Clearly...you would hope over time.
Written by Dan Freed in New York.
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