NEW YORK (Dow Jones)–Bank of America Corp. (BAC) Chief Executive Officer Brian Moynihan said he believes the bank has the ability to earn between $35 billion and $40 billion a year in pre-tax earnings when the business normalizes.
Heralding a “new era” and the nation’s largest bank, Moynihan kicked off the bank’s first investor day conference since 2007 promising the bank has no intentions of making any more acquisitions and will instead look to cut costs and focus on its customers.
“I can’t stress enough to you how much of a peace dividend we’ll get without mergers,” Moynihan said, adding the bank doesn’t need anything. “That peace dividend is effectively a permanent dividend.”
That included his complete disinterest in buying a European bank, or expanding to do consumer banking abroad.
“We are going to get most of our earnings from [the] U.S.,” he said, adding he’s often asked about buying a European bank. “We aren’t buying a European bank, I couldn’t think of anything less interesting.”
Bank of America’s buying spree at the end of the last decade became a calling card for Moynihan’s predecessor Ken Lewis, and Moynihan has largely spent his first year on the job cleaning up messes and fixing problems. He has no plans to introduce more distractions and costs from more mergers.
As for his pre-tax earnings forecast, the figure would represent growth from the pre-crisis era for the bank.
The bank in 2010 lost $1.3 billion pretax, largely because of goodwill writedowns and problems from previous purchases. It earned $4.4 billion in 2008 and 2009, $20.9 billion in 2007 pretax and in 2006 it earned $32 billion.
Moynihan said instead the bank was focused on returning “every dollar” in capital to shareholders, through regular dividends, share buybacks and special cash dividends. He said in the year 2013 to 2014 and beyond the bank could be paying out $12 billion in regular dividends and be left with $30 billion more to spend on buybacks and special payouts.
Moynihan touted the bank’s ability to use its multiple assets by selling its customers more products inside the bank. He also said the bank is focused on slashing costs, not only those from combining its previous mergers but those on its actual businesses. He said the bank was targeting an efficiency ratio, which measures costs as compared to revenue, of 55%.
He said the bank expects to get to normalized earnings by focusing on strategy. By business line, he said the bank’s deposit business would be normalized by 2013 while wealth management would be between 2011 and 2013. Card services would take until 2012 or 2013 while home loans would take the longest, likely 2014 or later.
On the firm’s business dealing side, its commercial, corporate and investment banks should normalize in 2012 or 2013, he said.
The second presenter of the day was Joe Price, the head of the bank’s consumer businesses. Price said the bank is looking to shutter about 10% of its about 5,900 banking centers across the country. Price said the bank is simply in places it shouldn’t be, and has strong presence where it thinks it should.
Bank of America shares rose 2.1% to $14.32 in recent trading.