Register for PaymentsJournal
Back to News
BofA’s Moynihan Says ‘New Normal’ in Banking Not as Profitable
November 23, 2011
Bank of America Corp. Chief Executive Officer Brian T. Moynihan said that slow economic growth and new regulations mean that the “new normal” in retail banking won’t be as profitable as before. The second-biggest U.S. lender by deposits is cutting costs and seeking to sell more services to clients to adjust, Moynihan said today at an investor conference in New York. The Charlotte, North Carolina-based company loses money doing business with many households at its consumer-banking operation, he said.
“It’s going to be a smaller platform, it won’t be quite the same as it was at Bank of America and around the industry,” Moynihan, 52, said at the conference. “We have 42 million retail customers, many of those don’t contribute or overcome their cost-to-serve.”
Bank of America and JPMorgan Chase & Co., the biggest U.S. lender, and No. 3-ranked Wells Fargo & Co. are seeking ways to replace revenue after regulators limited debit-card fees and overdraft charges.
“Much of the profitability is going to involve a lower expense base and a deeper wallet share per customer,” Moynihan said. The company is also focusing on serving small businesses and added 500 bankers in this area in 2011 and seeks to hire 1,000 more next year, he said.
Moynihan aims to cut about $5 billion in annual costs by the end of 2013, mostly by trimming about 30,000 jobs in retail banking and support operations. Even with the changes, consumer banking is unlikely to return to earlier profits, the firm said in a slideshow presentation. Banks must operate in a new environment in a post-Durbin world, and continue to try to identify ways to cover their operating and selling costs across their customer base. Front-and-center will be ways to cut costs while maintaining or improving customer service. A critical component of this strategy will include leveraging banking channels more effectively. With fewer personnel available to service customers, particularly lower-margin retail customers, enhanced channel strategies will be called upon to provide new efficiencies throughout FI organizations.
Read full article:
Contact a Mercator Advisory Group Analyst
Search News Items
Advertise With Us
Recommend RSS Feed
Join Buyers Guide
Host a Strategy Session
List a Calendar Event
Give Us Feedback
Contact Mercator Advisory Group
© & ™ 2002 - 2013 | Mercator Advisory Group. All Rights Reserved
Terms and Conditions
Make Us Your Homepage