Bank of America CEO Moynihan expects to increase dividend, share buybacks

Brian Moynihan says 'shareholders ought to benefit' from the Bank of America’s profitability

Bank of America chairman and CEO Brian Moynihan, in an exclusive interview with FOX Business' Maria Bartiromo, said that he expects to increase dividends and share buybacks given "shareholders ought to benefit" from the bank's profitability.

"We’d expect, assuming we get through the stress test, which is in the process and I’m sure we will, and [as] the new rules come in, we expect to increase our dividend and increase our share buybacks because frankly, it’s simple, we’re making good money doing a great job for our customers and a great job for society and, therefore, our shareholders ought to benefit too so that’s what we’ll do," he told "Mornings with Maria" on Wednesday. 

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BAC BANK OF AMERICA CORP. 38.78 -1.02 -2.56%

In March, the Federal Reserve announced plans to remove a rule that handcuffed the banks from raising dividends and buying back shares in another strong sign the U.S. economy is recovering from the coronavirus pandemic and its associated shutdowns. 

The Fed, provided these financial institutions pass the next round of stress tests set for next month, will remove the restrictions imposed during the pandemic, as detailed in a statement.

Stress tests, instituted following the 2008 financial crisis, are aimed at ensuring U.S. financial institutions are well-capitalized in the event of a sharp downturn and able to lend to consumers and small businesses.

U.S. Treasury Secretary Janet Yellen, during her testimony with Fed Chairman Jerome Powell in March, said banks looked healthy and could begin to restore dividends in response to a question.

Moynihan noted on Wednesday that Bank of America is "very optimistic about 2021 and beyond for the United States and for the globe" if the rest of the world gets vaccinated as well. 

Moynihan pointed to "positive" economic developments, including rising consumer spending and decreasing unemployment, although he did acknowledge the disappointing number of new jobs in April. 

The unemployment rate unexpectedly rose to 6.1% — while it's still well below the April 2020 peak of 14.7%, it's about twice the pre-crisis level, the Labor Department revealed in its monthly payroll report released Friday.

Economists surveyed by Refinitiv expected the report to show that unemployment fell to 5.8% and the economy added 978,000 jobs. The report revealed employers added a measly 266,000 new jobs in April.

Last month, Bank of America reported a jump in first-quarter profit, exceeding estimates as the bank released reserves it had set aside to cover potential loan losses due to the pandemic. 

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Net income applicable to common shareholders rose to $7.56 billion, or 86 cents per share, from $3.54 billion, or 40 cents per share, a year earlier, surpassing estimates from Refinitiv analysts’ expectations of 66 cents per share, Reuters reported

The second-largest U.S. bank by assets reportedly released $2.7 billion from its reserves, in anticipation of a swift economic recovery as more businesses reopen and as more people get vaccinated.

The appetite for new loans decreased during the pandemic as customers saved more and large companies relied on capital markets for funds rather than banks.

"Our deposits have grown $300 billion-plus year-over-year so we had to put that money somewhere, loan demand hasn’t been as high and [so] we’ve been deploying in securities," Moynihan told Bartiromo, adding that "we need to invest that money to help get that return for the shareholders."

Bank of America reported that digital usage continued to grow with 40.3 million active digital banking users in the first quarter and digital sales accounting for 49% of all consumer banking sales. 

"What we are seeing [is] well over half of our sales are digital," Moynihan said. "We have two billion digital interactions a quarter now, it is just a massive program." 

Moynihan then noted that "our Zelle program is seeing massive amounts of money transferred going through." 

In its earnings release, the company noted that 13.5 million active Zelle users, which now includes small businesses, sent and received 170 million transfers worth $49.5 billion, up 66% and 83% year-over-year respectively.

Moynihan noted that what has been "interesting during the pandemic," is the fact that digital usage increased "across businesses into the commercial businesses, into the wealth management businesses so they are adapting." 

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"We are high touch, high-tech company and that’s why we’re getting our team back to work and visiting clients and hundreds of client meetings [are] going on face-to-face as we speak," he explained. 

"But on the other hand that digital platform served us well [during the pandemic] and will continue to serve us well and is a chance to make a great experience for our customers and to make money for our shareholders."

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FOX Business’ Suzanne O’Halloran contributed to this report.