BofA Warns of No Growth for Next Five Years

Tuesday, 08 Mar 2011 09:07 AM


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Bank of America could have relatively high expenses for the next two years as it wrestles with mortgage losses, but longer term it plans to cut costs to improve profitability, its chief executive said.

"We are still eating large costs" related to the financial crisis and foreclosures, Chief Executive Brian Moynihan said Tuesday at the bank's first investor day since 2007.

Moynihan said he is not interested in major acquisitions, and that the bank will not have any appreciable asset growth for the next five years.

Bank of America's assets averaged $2.44 trillion in 2010, ending the year at $2.26 trillion.

Moynihan spoke to an audience of about 300 investors and analysts in the Plaza Hotel ballroom. Applause was muted when he took stage and when he exited.

His comments show how hard it will be for the largest U.S. bank to improve its performance over the next few years. Two standard levers for improving profitability — increasing assets and cutting costs — will be difficult.

The bank hopes to bolster its bottom line through moves including selling more products to its existing customers and offering more services to customers outside the United States.

In late January the bank reported weaker-than-expected revenue and a second straight quarterly loss after its limping mortgage business triggered writedowns and legal settlements.

Moynihan said the bank's efficiency ratio — expenses relative to operating revenue — is too high. It was 62 percent in 2010. Long term, he hopes to get it down to 55 percent or lower. From 2004 through 2007, Bank of America's efficiency ratio averaged closer to 50 percent.

The chief executive told investors he hopes to drive the efficiency ratio "as low as it can go" before it impacts how the business is run.

Moynihan said he expects earnings to return to more normal levels in 2012 and 2013, with pretax income hovering around $35 billion to $40 billion.

© 2014 Thomson/Reuters. All rights reserved.

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