BofA's Moynihan: Upcoming Stress Test Draconian, But Necessary

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Bank of America
BAC
CEO Brian Moynihan believes the the upcoming Fed stress test is happening under draconian circumstances. But, he told CNBC's Squawk Box, if this test turns out to be successful, that would be quite a testament to the banking sector's strength "You have to put in context what they are testing," says Moynihan. "We have twice as much equity now than what we had when the first stress test happened in 2008-2009. We have $300 billion less risky assets on our balance sheet, " he continues, "which is tremendous in a situation where housing is down 20 percent." Regarding potential concerns coming from public disclosures from a stress test, Moynahan said care should be exercised, as such information affects forward projections. "However, should this stress test be absorbed successfully, with housing down as it is, and unemployment down 12 percent over previous levels," he notes, "that is a very powerful statement." Regarding the possibility of dividends, the Bank of America CEO said he had not asked the Fed permission to return capital to shareholders. "I believe the responsible thing to do right now is to strengthen our balance sheet and build our capital faster." In that regard, Moynihan points out his bank is ahead of the competition. "We went from 8.6% to 9.8% of Tier 1 capital, just last quarter alone. That is phenomenal, when our competition went up a mere 23 basis points," says the Bank of America CEO. Turning back to the subject of the Fed, Moynihan says he intuitively sees a more constructive economy than people realize. On the Fed's commitment to keep rates low till late 2014, Moynihan appears convinced that a rate change may happen earlier. "Regardless of whether a rate change comes at 2014, or at the end of 2013 for that matter, banks will end up making more money." Moynihan, however, does not dismiss what should happen in the interim is more belt-tightening. "Either way we put it, there are a lot of quarters to go, so a change of rate does not change what we have to do in the interim," he says, stressing Bank of America's cost reduction that has seen the cutting of branches, in response to customer behavior changes toward ATM and online banking.
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Posted In: CNBCEarningsNewsGuidanceDividendsMovers & ShakersPoliticsPsychologyTopicsManagementGlobalEcon #sEconomicsPre-Market OutlookMediaGeneralCNBCSquawk Box
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