At Bank of America’s Investor Day, M&A Hints, Would-Be CEOs, and AI Pitches

Brian Moynihan, CEO of Bank of America, during the bank’s investor day in Boston. (Mark Wilson/Bank of America)

Key Points

• Bank of America’s shares initially fell 2% after its investor day, despite the broader market and big bank ETFs finishing higher.
• CEO Brian Moynihan indicated that payments is the most likely area for potential U.S.acquisitions in the near-term.
• The stock rebounded 2% the following day, nearing its highest level since 2007, after clarification on a key profitability target.

As Bank of America Chief Executive Brian Moynihan sat down for lunch at his bank’s splashy investor day event Wednesday, the market was sending him a message: Investors, by their initial reaction to executives’ growth strategy presentations, weren’t buying what he was selling.

Shares fell as much as 3.4% and closed down 2%. The broader market and big bank exchange-traded funds finished the session higher. Moynihan, speaking with reporters at lunchtime, waved all that off.

“If you’re going to talk about a one-day stock reaction, let’s talk about yesterday, and the day before that,” he responded to a reporter’s question about the move. “We don’t look at the company that way.”

Most bank CEOs would agree. They talk about their share prices in years and economic cycles, not in hours and days. But Bank of America’s stock is under a microscope. Its lower valuation relative to rivals, and executives’ view that investors under-appreciate the firm’s growth prospects, is part of what prompted the bank to hold its first investor day since early 2011 and outline a set of fresh growth targets.

Now, as part of new bars investors expect the bank to clear, would it consider an acquisition to drive new growth?

Yes, Moynihan told reporters, and payments is likely the only area where Bank of America would consider an acquisition in the U.S. near-term. Its last acquisition, in 2021 for an undisclosed sum, was AxiaMed, which facilitates payments between healthcare providers and patients.

The Charlotte, N.C.-based lender held the event in Boston’s upscale Back Bay; Moynihan’s longtime home is nearby Wellesley, Mass. Shareholders and veteran analysts— Wells Fargo’s Mike Mayo and RBC Capital Markets’ Gerard Cassidy mingled in the audience—gathered for the event.

The agenda: seven-plus hours, 302 slides, and 17 top Bank of America executives on stage, including newly elevated co-presidents Dean Athanasia and Jim DeMare, who are seen as future CEO material. Their message: The bank is poised to grow faster across businesses, so you should invest in us. (“Grow,” in various forms, appeared 518 times in a transcript of presentations and the analyst Q&A session.)

The bank conveyed that strategy after years of the stock lagging rivals, never reclaiming its high set before the 2008-09 financial crisis, while JPMorgan Chase, Goldman Sachs, and Wells Fargo touched new records. Low-yielding bond investments that the firm made early in the pandemic have dragged on performance, a dynamic management said Wednesday would improve over time as those securities mature.

Investors will now turn their attention to execution: how the second-largest U.S. bank performs against its new near- and medium-term targets on returns, efficiency, and per-share earnings, and how it uses artificial intelligence tools to help lower costs and boost productivity.

Holly O’Neill, who runs Bank of America’s sprawling retail- and preferred-banking business lines, said her teams’ fraud-detection AI models have cut the rate of fraud losses in half for clients. Eric Schimpf, president and co-head of Merrill Lynch Wealth Management, said a newly installed tool on “every advisor’s and teammate’s desktop” reviews vast client information in minutes, eliminating hours of work.

By Thursday, shareholders were far more sanguine. The stock bounced 2% and neared its highest level since 2007.

Investors’ sentiment improved once executives reiterated to analysts after the market’s close Wednesday that the bank would reach a key profitability target earlier than investors had initially appreciated. Management’s clarification on the updated measure, return on tangible common equity, “helped settle initial investor unrest,” Chris McGratty, head of U.S. bank research at Keefe, Bruyette & Woods, wrote to clients.

Moynihan, a lawyer by training who took over at the start of 2010, has said he plans to stay put through the end of the decade, or to 2030. This fall, as part of the firm’s biggest management shuffle in four years, three key executives were elevated and emerged as more visible CEO contenders: Athanasia, DeMare, and finance chief Alastair Borthwick.

Athanasia, a 32-year veteran of the bank, was animated in his presentation Wednesday, cracking jokes and referencing sports rivalries. DeMare, who’s been with the firm for 17 years, was more muted in comparison as he discussed the global markets business, which he led for five years until his recent promotion.

“We got a lot of talent at this company, and it makes me proud,” Moynihan told reporters Wednesday as lunch was wrapping up. “Someday, some group of them will be the people still left when the rest of us are out. They have to develop the next round.”

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com