NEW YORK (
Bank of America
CEO Brian Moynihan outlined some more detail on the company's plans to replace revenue lost from financial reform, but he doesn't expect to see a "normalized" earnings scenario for two to three years.
At events in New York this week, Moynihan has been responding to investor concerns about the company's plans to get back into growth mode again. He said he expects a return on stated equity in the "low teens" and a minimum return on assets of 1% -- about double what both metrics are currently. Moynihan also expects to use excess capital to get dividends back up to at least a 30% payout ratio and sop up stock dilution via buybacks.
But he doesn't expect the transition to occur overnight.
"Our strategies are in place and winning in the market," Moynihan said at the Barclays Capital Global Financial Services Conference on Tuesday afternoon, but noted that "it's going to take a few years."
Moynihan outlined some specifics about Bank of America's plans to recoup revenue lost from new restrictions under the Dodd-Frank financial reform bill.
While the $7 billion to $10 billion goodwill writedown on the debit-card business is unavoidable for the third quarter, the CEO indicated that most of the other strategies for rebuilding revenue streams will be put in place over the next year.
For instance, BofA will be giving less profitable depositors an option: Pay a monthly fee or switch to do-it-yourself services by banking strictly online. Moynihan's management team will also have a hardcore focus on cross-selling an array of financial products to affluent retail banking customers, corporate customers and those who now use only Merrill Lynch's wealth management services.
In a slide presentation, Moynihan outlined the opportunities in dollar terms for the first time. Bank of America's affluent customers have over $7 trillion invested with other financial institutions, including $500 billion in deposits, $400 billion worth of mortgages and $180 billion in other types of securities lending.
In an effort to show Bank of America's progress so far, Moynihan cited some statistics. Over the past year, the portion of financial advisers who have sold at least four products to a customer has climbed from 5% to 61%. Referrals to its online brokerage, Merrill Edge, from the retail bank have increased by a multiple of three. Wealth management clients are now using nearly 172,000 banking products across the broader franchise, vs. 2,800 a year ago.
Still, Moynihan wants the wealth management division to grow a lot more. Right now, that segment accounts for $230 billion in deposits, ranking No. 5 behind Bank of America's $890 billion in traditional deposits,
$618 billion and
$266 billion. Moynihan wants it to grow much more, to become the dominant component of Bank of America's deposit mix.
And while commercial bank referrals of institutional retirement plans have nearly tripled over the past year - with the size and number of new plans growing exponentially - Moynihan wants more growth there, too. Of Bank of America's 40,000 middle-market clients, just 5% of them use both investment banking and capital markets services. Eventually, Moynihan wants the Bank of America franchise to collect 20% to 25% of those fees, up from a current level of 20%.
So what's standing in the way of all that growth? Unemployment, higher capital requirements and a weak loan appetite from creditworthy borrowers. Dealing with troubled mortgages alone will take another two years, according to Moynihan.
And while the CEO asserts that Bank of America won't have to raise any more capital to comply with new Basel III requirements and will not be using its excess capital for acquisitions, he didn't have a bright outlook for near-term shareholder rewards.
While Moynihan does take rebuilding the dividend from a penny a share seriously - "We'll do that as soon as we can; we are focused on it as much as you are," he said - he didn't seem inclined to do it any time soon. He seems more concerned with building a track record of stable growth that's more predictable and less volatile than the past few years.
The Fleet veteran has been in charge of Bank of America for nearly nine months now and said that his management team is focused on growing the business - cautiously, rather than hastily. In a statement that might describe his management style, Moynihan described himself at another conference on Monday morning as "a person who works for a large bank
that went into the financial crisis having stretched its capital and was dependent on future economic success which did not come to rebuild that capital."
--Written by Lauren Tara LaCapra in New York.
>To contact the writer of this article, click here:
Lauren Tara LaCapra
>To follow the writer on Twitter, go to
>To submit a news tip, send an email to:
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.