This week I had the opportunity to listen to a talk from Bank Of America CEO Brian Moynihan. From the Banking Symposium put on by
and my experience studying Hingham Institution For Savings I have learned a lot about what makes quality banks and bankers.Banking is both an art and a science. Too often is it only thought about from the numbers or science side. This is important but the qualitative side is equally important. Banks are people businesses. They need to perform based on making many individual judgements. Moynihan as CEO cannot check and approve every issued loan nor can his deputies, however, what bank managers can do is create a culture that fosters the kind of mindest that banks thrive off of. Banks are a noble service. They create value at a high level for both corporations as well as individuals. This financial infrastructure is so crucial to our society they can’t operation like any other business. Just look at Silicon Valley Bank and First Republic, these two organizations weren’t even close to the largest banks in the US, but between publicity, misunderstanding, and the structure of the industry the effects of the two bank failures were massive.
This is all to say that banking is a unique pursuit and what makes bankers and banks successful is a specialized skillset. I very quickly noticed this quality from Moynihan during his talk. He mentioned and understood the large ramifications of his actions. As the CEO of one of the largest banks in the world managing over 200,000 people the day to day decisions he makes changes the lives of many.
“The toughest thing is to disrupt someones life”
When asked about managing so many employees and structuring the bank for success Moynihan easily recalled the complete base compensation and benefits packages for Bank Of America employees including 401k, salary, healthcare, etc. He added that in 2010 the bank made the decision to double its healthcare coverage for all employees and hasn’t dropped it since. This was motivated by the focus on employee satisfaction and security. He said that it is easier to focus on your job when you’re not constantly worried about one of the biggest stressers in the world, healthcare.
Crucially Moynihan has a fundamental understanding of the importance of people and how they live their lives. This is both on the customer and employee side. For example, in 2009, before he was CEO but still a manager at the bank, there were 1bn overdraft charges. Charges like these can add up and often be significant strains on already difficult financial situations. The bank decided to restructure the way overdrafts were enforced and there were ~30m charges last year because of it.
A key pillar of the company that Moynihan brought up multiple times was the idea of responsible growth. This means what risk is there to the customer, how sustainable is it, how much growth potential, what risk does it pose to the company, and more. In addition to this he talked about a duty to deliver for business and society. Banks are a key part of society and have to consider the great effects more so than other businesses.
Other Advice From Moynihan:
Moynihan also gave non-banking advice. Some on career and just general life advice. I appreciated the perspective and the insights.
The first thing he said was read what you don’t know about or have an opinion about. The first part seems obvious but the second is crucial. It’s a lot easier to be open minded when you listen first to an idea as opposed to immediately judging it.
Next he said to not plan your path. He went on to say that if someone had told him when he graduated college that he would be CEO and Chairman of Bank Of America he would have no ability to map his path to get there. Instead he says you have to make a conscious choice to be a manager or practitioner. He obviously chose manager and depending how you decide will change a lot about your career.
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Until Thursday,
Soren
Thanks for sharing. Whats your though on the last quarter results for Hifs? Were they blind to the risk of sudden increase of Interest rates or this is part of the risk they are willing to take considering it will normalize over time.