Bank of America (BAC) Q3 Earnings Call

posted in: Earnings Call, Notes | 0

Bank of America (BAC) CEO Brian Moynihan said the company is continuing to use technology to lower its expense base

“We reported earnings of $5 billion or $0.41 per diluted share and EPS improvement of 8% from the year ago quarter. We improved operating leverage across the businesses, utilizing technology to lower costs and improve our processes.”

Credit discipline remains strong

“Another question that we get asked is can credit remain this strong? And in this quarter, it’s still got better again with our charge-off ratio decline to 40 basis points this quarter at an historic low. This is driven by changes we made right after the crisis, thinking 2008 and 2009 and the long term benefits of that effort continue to come through. And by the way, sticking to our responsible growth strategy, even as times have been relatively better.”

Growing their deposit base substantially 

“Deposits are core part of what drives our franchise earnings. We have 1.2 trillion of deposits that’s proof the customers entrust us to safeguard their money. We are heavily weighted and mix those deposits towards consumers, whether they are general consumers or wealthy consumers. This in turn provides a very stable base of funding for the company and allows us to be less relied on the markets we are funding. Nearly $450 billion or 36% of our deposits are non-interest bearing, a very strong mix. Deposits on average grew $68 billion year-over-year or 6%. The teams have done tremendous work here, and this quarter wasn’t an anomaly. This is the fourth quarter consecutive quarter where we have grown deposits more than $50 billion over the previous year.”

Still finding ways to reduce expenses

“Our expenses declined 3% from the third quarter of 2015 to 2016. Our efficiency ratio improved 60% to 62% this quarter that is a 400 basis points improvement from last year’s third quarter. We continue to deliver expense reductions while continuing to invest in technology and sales teams and other matters are important for the futures franchise. After taking in to account the addition of large bank FDIC assessment at the start of this quarter, expenses are also down on linked quarter basis, even as we continue to invest and absorb all the severance, regulatory, resolution planning and other repositioning cost to continue to reduce our operating cost.”

“Expense reductions are the result of a number of initiatives. For example, mobile banking penetration helps to optimize our delivery network, while improving customer satisfaction. More chip cards help us lower fraud cost and digitization of processes and statements helps us eliminate paper and related handling cost.”