Moynihan sees BofA cutting costs by $5 billion annually by 2014
Bank of America (BAC) CEO Brian Moynihan spoke in New York Monday, highlighting the company's profitable business lines while acknowledging litigation surrounding mortgages remains the bank's main challenge. Mortgage issues, much of which Bank of America assumed when it acquired Countrywide Financial Corp. three years ago, plagued Moynihan's speech at the Barclays Capital 2011 Global Financial Services Conference and the question-and-answer session that followed. According to Moynihan, five of six BofA businesses are generating solid profits. But the banking giant needs to focus on dealing with the mortgage issues, lawsuits and regulatory actions piling up over Countrywide's sale of toxic mortgages that were securitized and sold off, rather than worry about profitability, Institutional Risk Analytics said. Moynihan conceded other challenges for the bank include expectations of low economic growth, low interest rates that cut into lending profitability and new regulatory capital standards that have banks retaining more capital and curtailing lending. He said Bank of America has grown its reserves to address litigation and regulatory actions tied to representations and warranties on mortgage loans to $18 billion from $4 billion in 2009. Last week, reports surfaced suggesting BofA would eventually reduce its workforce by up to 40,000 people. The bank acknowledged it was realigning its business units and announced two top executives had left. Moynihan said the bank is nearing the end of the first phase of a comprehensive review of its consumer businesses and support functions. He expects the first phase of the company's Project New BAC to result in annual cost reductions of $5 billion by 2014. Write to: Kerri Panchuk.