The most important thing I took away from Brian Moynihan's recently released 2015 shareholder letter was his statement that Bank of America (NYSE:BAC) is "no longer clouded over" by crisis-related liabilities. The significance of this sentiment is underscored by the fact that it came in the first paragraph of the CEO's statement, which noted that (emphasis added):
In 2015, your company earned nearly $16 billion and returned nearly $4.5 billion in capital. This progress is the result of continued strong business performance, no longer clouded over by heavy mortgage and crisis-related litigation and operating costs.
This wasn't the first time in the past year that Moynihan has made this type of claim. He hinted at it in July in his remarks announcing the bank's second-quarter earnings, which shifted from a focus on expense and risk management to that of revenue generation -- or, what he referred to as "invest[ing] in the future." As Moynihan said on the quarterly call with analysts:
Just to mention a few of these investments, we added sales specialists in our financial centers, up 3% versus last year. We added 3% to our financial advisors since last year, 4% to our commercial and business bankers. We've opened new financial centers in new markets that we previously didn't have coverage and we continue to upgrade those in other markets.
In addition, we continue to invest in young new talent in our company. We hired a record number of teammates from college, over 1,200, and we have our intern program to over 1,800 this summer. And we continue to invest as we have said in technology, so that was $3 billion we spent this year to continue to improve and drive our products and our capabilities in the company.
The change in Moynihan's tone was supported by two occurrences last year that garnered little attention. The first was a decision by a New York state judge that reduced Bank of America's outstanding crisis-related legal liabilities by $7.6 billion. The judgment also stemmed the inflow of new claims, dropping them at the time from an average of approximately $2 billion a quarter down to roughly $200 million.
The second thing event to note also occurred in the second quarter, when all three of the nation's leading credit-rating agencies increased their ratings on Bank of America. A company of Bank of America's size and complexity has numerous ratings that apply to its parent company, subsidiaries, and various debt and equity instruments -- not all of which were increased. But the fact that there was positive movement in some of them is significant.
I've discussed the significance of this in the past. If Bank of America's debt ratings matched Wells Fargo's, it could save upwards of $2 billion a year in interest expense on long-term debt alone.
In sum, while there's no doubt that Bank of America still has considerable room to improve -- as is evidenced by its 0.74% return on average assets last year, roughly half what Wells Fargo achieved -- positive and unequivocal statements like Moynihan's above will certainly be welcome news for investors in the nation's second-biggest bank by assets.