Bank of America (NYSE:BAC) is changing for the better, and its CEO, Brian Moynihan, has the evidence to prove it.
In a wide-ranging interview with Forbes magazine, Moynihan discussed the last four-and-a-half years as he stood atop Bank of America. There was conversation around the troubles that once plagued it, the questions surrounding its solvency in 2011, and the countless other issues that have come up since January 2010.
But when discussing where Bank of America is now and where it is heading into the future, Moynihan had one quote investors must see:
We've fined-tuned the business around basic principles: Who are our customers? What do they need from us? And what can we be good at? Changing the mind-set requires getting people to stop thinking about the market share, and start thinking more about the value of a product for the customer.
The reason for optimism
Many investors have heard of the Project New BAC program spearheaded by Moynihan, which was announced in September of 2011. This is the bank seeking to become more efficient as it slashes expenses across its divisions and units. In the latest annual report, the bank noted $8 billion worth of yearly expenses would be cut as a result of the Project New BAC initiative, of which $6 billion has already been realized.
But based on Moynihan's words above, Bank of America won't improve by just slashing its expenses, but the true thing that will make Bank of America "new" is its insistent focus on meeting the needs of the customers and doing what is best for them.
The article reminds us Bank of America has slashed its checking account options from 70 to 3. It also changed its overdraft policy -- which formerly allowed customers to use their debt cards even with insufficient funds so a fee could be charged -- costing the bank an estimated $2 billion in revenue. And Bank of America has done countless other things to change how it operates.
B of A's president of strategic initiatives, Terry Laughlin, suggests the bank understood "it's not about stretching for every last dollar from a client," and Moynihan "has broken a lot of traditionally held beliefs," about the way a bank should function.
If we are delighting customers, eliminating unnecessary costs and improving our products and services, we gain strength. But if we treat customers with indifference or tolerate bloat, our businesses will wither. On a daily basis, the effects of our actions are imperceptible; cumulatively, though, their consequences are enormous.
It appears Bank of America understands the wisdom of Warren and is doing its best to ensure it is "delighting customers, eliminating unnecessary costs and improving [its] products and services."
Yet it doesn't simply understand it, but it is executing on it. J.D. Power revealed that Bank of America's customer service ratings have jumped. Laughlin himself remarked the bank has "sacrificed some earnings to do the right thing for the customer."
Troubles characterized Bank of America for years and years, but under Moynihan, and perhaps thanks to the guidance of Buffett, the turnaround has begun, and its best days are undoubtedly ahead of it.