Since the financial crisis, Bank of America (NYSE: BAC ) and its reputation have taken a beating. With scathing reports still hitting the headlines about the bank, is there anything else the bank can do to repair it battered image? In this segment from The Motley Fool's everything-financials show, Where the Money Is, banking analysts David Hanson and Matt Koppenheffer discuss what the bank has done to try and repair's image and why its reputation isn't shouldn't scare away investors.
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Full transcript below
Matt Koppenheffer: Moving on, we’re going to go to … who do we have next?
David Hanson: Bank of America.
Koppenheffer: We have Bank of America.
Koppenheffer: Yeah, we always have Bank of America. Bank of America and its reputation; we’re talking reputation here. We just had that article/column/exposé from Bloomberg yesterday. That just came out yesterday, right?
Hanson: Yeah, I think so.
Koppenheffer: It seems like ages ago.
Hanson: You’re all thrown off. You’re on West Coast time.
Koppenheffer: Thirty five hundred words?
Hanson: Yes, very long.
Koppenheffer: That’s why it seemed like it was so long, because it took me a long …
Hanson: A little bit scathing.
Koppenheffer: Very scathing.
What does Bank of America do at this point? And when does this stop? To be fair, for journalists this is like the well that never runs dry, because articles like that are like catnip for readers. I read the whole thing -- I read it from start to finish.
At what point do journalists stop seeing receptivity? When do they stop finding new stories that catch that kind of …?
Hanson: I don’t know. I don’t know if we have an exact time, but I think it will happen.
Koppenheffer: I was hoping you’d give me an exact day.
Hanson: I don’t have an exact time, but it seems like time will heal all these wounds. We’re still very close to the financial crisis; I know we always forget that. It was five years ago -- so long ago.
It wasn’t that long ago. A lot of this stuff will continue to get worked through, and I think in the long run their reputation will get better, just because there will be less interaction between banks and their customers -- human interaction, whether you think that’s a good thing or a bad thing -- but depositing a check over your phone; that’s you not going into a Bank of America branch and potentially being aggravated by having to wait in line, not being serviced the way you want to.
I think there will be less interaction, the Morgan stuff will get worked through, so I don’t think they should do anything drastic. They have their commercials coming out; they’re saying, “Life’s better when we’re connected.” “Bank of America’s there when you want us, but we’re not going to be the main thing in your life.”
I think they have the right strategy in place. You look at Brian Moynihan; he really looks up to Anne Finucane, who’s in charge of this strategy in terms of getting the reputation back in place. I think he said, “Ultimately, we all report to Anne,” so this is obviously front and center in his mind, getting their reputation back. It’s not there yet, but I think they have the pieces in place.
Koppenheffer: A lot of what we still continue to hear, whether it be Bank of America or any of the other big banks, the well that doesn’t run dry comes from 2008-09, and to some extent the beginning of 2010.
If you look ahead five years, do you think we’ll see some of the same kind of stories coming out of 2012 and 2013?
Hanson: It’s hard to imagine the same level. The level of scrutiny that banks are having today, in terms of what type of loans they’re writing -- because that’s really what the problems get down to is, “Was it a bad loan?” If it’s a bad loan, then all these other problems are going to come from it, whether it’s foreclosure ...
It’s hard to imagine that it’ll be as bad. Maybe there will be some stuff, but I think you have to be optimistic that it’ll slowly go away.
As investors, you have to remember that this is part of the story, but it’s not the whole story with Bank of America. You still have to look at the performance, the valuation; this is just one cog in the machine of whether you’re making an investment here.
Koppenheffer: Well, and you’ve got millions of customers.
Koppenheffer: What I’m hearing from you is that this story does not change how you’re viewing Bank of America.
Hanson: I don’t think you can let this stuff judge what’s going on in the market. If you let every negative story about any company impact whether you’re going to make an investment or not, you’re never going to buy a stock for the rest of your life. Anybody can say something bad about any company. I think you have to take it as noise, more than signal.
Koppenheffer: I’m trying to think of any company that I haven’t heard a bad story about.
Hanson: We talk about a private company, Uber, that’s been great. All the customers love it.
Koppenheffer: Did you see that?
Hanson: I saw you tweet a story this morning about how they do their -- “price gouging,” some people are calling it -- supply and demand. They were charging 8x the normal rate, and now people are saying bad things about Uber, so even companies that people love, stuff comes out.
Koppenheffer: Still love Uber.
Hanson: Still love Uber, but I’m not paying 8x.
Koppenheffer: No, I’m not. What they said -- I didn’t see the actual quote from this, but what the article said that Uber was saying, is that, “Well, when the prices go up, people can walk instead.” That’s essentially what my wife and I do when those prices go up; we’ll take the Metro. We’ll take the Metro, that’s a better deal.