Investor Summit Gives Bank of America a Chance to Soothe Angsty Investors

Brian Moynihan, CEO of back-of-the-pack Bank of America, is in the hot seat today as he tries to convince shareholders and analysts that the country’s second-largest bank is at last geared for faster growth. 

BofA, which is hosting its first investor day in nearly 15 years, hasn’t disclosed much about what to expect at the meeting, and it didn’t respond to our request for comment. But we’re likely to hear Moynihan declare that the bank is taking on more risk and that higher returns are on the horizon. 

BofA’s Struggles 

Surpassed in size by only JPMorgan Chase, Bank of America holds $3.4 trillion in total assets and operates more than 3,600 branches in the country. It’s among the best at traditional banking and deposit-taking, but that’s not enough in today’s competitive landscape. While the bank’s peers have been expanding into less traditional areas, BofA has lagged in key segments such as wealth management, credit cards, and loan growth. 

There are also the bank’s balance sheet missteps. When liquidity surged in 2020, BofA put that extra cash to work buying long-duration securities with low yields. As interest rates started rising, those securities remained stuck on the bank’s balance sheet. Net interest margins took a dive compared with its peers, pressuring overall profitability. But it’s beginning to turn that around: 

• BofA’s net interest income rose 9% from a year earlier to $15.2 billion in the three months through September, the company reported last month. Net interest margin, which reflects the gap between what banks pay to depositors and charge for loans, rose eight basis points to 2.48%. Overall profit increased 23%, and revenue grew 11%. 
• The bank’s net interest income growth has been outperforming JPMorgan’s of late, and Suryansh Sharma, senior equity analyst for Morningstar, estimates that BofA will reap at least four to six more quarters of significant net interest income gains. That could translate into strong profitability, he adds. The bank has previously said it expects record net interest income growth of 6% to 7% this year. 

Succession Planning: Experts will also be looking for clues about who is taking the helm after Moynihan. In September, he announced Dean Athanasia and Jim DeMare would become co-presidents while Alastair Borthwick would become chief financial officer. “It’s a three-person horse race to become the next CEO, and this will be a chance for the investment world to analyze them,” Mike Mayo, head of US large-cap bank research at Wells Fargo Securities, said recently on “Bloomberg Markets.”