President and CEO of Bank of America, Brian Moynihan during an interview with The Globe and Mail at the Merrill Lynch offices on Bay Street.Fernando Morales/The Globe and Mail
Brian Moynihan's voice is only slightly louder than a whisper, and it tumbles from his mouth at a rapid-fire pace of about 160 words per minute. At times, it's hard to keep up with him.
But on one point, the words are distinct and forceful, and the message from one of the world's most powerful bankers is crystal clear: "We're not buying anything."
It's a statement that separates Mr. Moynihan, the chief executive officer of B of A from his deal-hungry predecessor, Kenneth Lewis - and the rest of the banking pack.
Many bankers expect that a slew of acquisition opportunities will soon emerge, as regulators and political leaders put the final touches on the new, post-crisis rulebook for the financial sector. The process takes another important step this weekend when the world's top financial regulators and central bankers will release a key set of rules on bank capital, and continues with G20 meetings in November in South Korea.
After that, it's expected that banks will have far more clarity on a number of issues, including how much capital they will have to hold to support different types of businesses. A number of banks will rethink their strategies, which will likely cause them to buy and sell assets. Royal Bank of Canada is avidly scouting wealth-management operations in Europe, for instance, because it expects that a number of them might be put up for sale in a few months' time.
But for Mr. Moynihan, whose bank rescued Merrill Lynch in 2008 from almost-certain collapse - and paid a steep price for it - there will be no shopping.
"I was an M&A guy and bought companies for years in one of the early parts of my career; it's not that I'm not used to doing that. Do we know how to merge companies? The answer is absolutely yes. It's just that we don't need anything now," he said in an interview during a recent trip to Toronto.
"What we needed to put together was this franchise, now it's done. Now we've got to operate it."
Bank of America is paring back, shedding holdings from Balboa Insurance to a stake in Santander Mexico.
Mr. Moynihan agrees that the fog that has enveloped the banking industry for almost exactly two years appears set to lift. In the 24 months since that fateful Sunday when Bank of America bought Merrill Lynch and Lehman Brothers was forced into bankruptcy, banks have been stuck in a holding pattern. Without a clearer set of rules, it was hard for executives to determine whether to emphasize capital markets or consumer banking, London or New York, mortgages or credit cards. And many bank CEOs were focused on simply surviving the meltdown.
"I'd say all the high inside fast balls have come at us, we've actually survived and got to first base, and now we can see what we can do after that," Mr. Moynihan said.
"One of the tough things about financial stocks in the market is the lack of clarity around the basics, how much equity you need and stuff like that. It's getting clearer."
It's a sentiment that's being expressed by a number of financial executives right now, and it's ushering in a new era - one in which they must quickly determine how to revive businesses that are taking a hit from new regulations and still-sluggish growth in the world's industrialized countries.
"We expect to have more clarity on the regulations and how they will impact us following the November G20 meetings in Korea," Royal Bank CEO Gordon Nixon told analysts recently. "In the meantime, we remain focused on proactively pursuing opportunities to mitigate any potential impacts, and continue to explore alternatives across our businesses."
The main challenge for banks now will be determining how to make up for revenues that are hurt by the new reforms, from trading revenues to overdraft fees. Mr. Moynihan warned investors this summer that he expects a new U.S. rule known as the Durbin amendment could reduce by 70 per cent the billions of dollars that the bank earns each year on debit-card interchange fees.
"If you can't make money that way, when a core chequing customer uses a piece of plastic to swipe through, you have to make it another way, because we're not going to be able to provide 6,000 branches and 18,000 ATMs unless we can make money in consumer banking," Moynihan said. "But it takes time to get through those changes.
"It will be a series of incremental changes that we'll all make to pricing, to account structures, to whatever it is," he added.
For example, instead of charging a small group of customers overdraft fees that subsidize free chequing for the rest, U.S. banks may begin charging monthly fees to everyone, or lowering interest rates on deposits. That's a shift towards a more Canadian style of banking.
Bank of America recently decided to head off the politically contentious overdraft issue by saying that its customers will no longer be able to go into overdraft and incur fees unless they've signed up for overdraft protection.