American Economy Shows Solid Growth

0:00 Speaker 1 Sunday Morning with us. Today is Brian Morninghan and he’s chairman, president and CEO of Bank America, the second largest bank in America. And well we’ve been Brian morning hen. We’ve been friends for a long time, and I was on some of your advisory boards. And every December I predict the price of Bank America stock for the following year.

0:25 And I’ve been right nine out of eleven times, or nine out of twelve times, and the stocker is moving. And congratulations and you having me a great year.

0:35 Speaker 2 Well, thank you, John. The team has done a great job and the coupan continues to perform well. Just at another very strong quarter and we’re looking forward to having more of them. Thank you.

0:43 Speaker 1 Now, you have seventy million credit card carriers, and every Monday morning you get a report of how America is really doing consumer wise. Tell us about that.

1:00 Speaker 2 So it’s seventy million customers, of which about forty are checking customers, so you’re seeing what’s going on and they’re checking account and then the other credit card customers, and so if you look at them, in the month of July twenty twenty six, they moved five percent more money out of their accounts. Or use their credit cards and

1:19 debit cards to buy things than they did last year July twenty five, and that’s good, and that’s consistent with a solidly growing US economy to two and a half percent. We’re seeing and they’re spending on things that necessarily are show that they’re enjoying their summer, so cruises and travel and out of home entertainment meaning live entertainment experiences. Restaurants

1:44 are solid, and gas prices are up. But the effect of that is year of a year is still pretty high, but effective in the last few months has not been It has been relatively the same, so that’s kind of been adjusted to and their spending, well, there’s discussions about affordability, which is a critical element to make sure, you know,

2:05 we can have a good life here in America, because you know, this country is at the best country in the world. On the other hand, what you’re seeing is are wages are grow and they’re spending more, which is good for the American economy across the board, whether they’re in the top third of incomeenters, middle third, or lower

2:19 third income iners.

2:20 Speaker 1 Well, the stock market is an all time high, and it seems like there’s confidence in the American dollar and the confidence in the American markets.

2:33 Speaker 2 Absolutely, we’ve seen and I remember the stock market being up is up because the earnings power of the US companies, the companies that are listed in report is very strong. So as you’ve seen us go through what they call earning season, i e. At the end of the quarter, as people report, whether it’s our industry and financial services,

2:51 our company and Bank of America, whether it was the AI hyperscaler so called those types of companies, or even the oil companies, you know, all of them had strong earnings, which is really what’s driving the market. So when a lot of people look at the evaluations and say or the movement and see it’s gone up a lot, they

3:09 then get back to saying, well, you know, the earnings have gone up a lot, so as a stock market to go up. So our teammates, for our teammates that cover the markets are very constructive. But it’s an earning’s driven power of American economy story, not just strictly evaluation story.

3:24 Speaker 1 President Trump has said he’s trying to bring companies back to America, back from Mexico, back from China, and he’s predicted as much as nineteen trillion dollars. What over how many years do you think that could happen.

3:40 Speaker 2 Well, they’ve got commitments in their counting things, so I’m not sure exactly what number they get to. But let me back up and just talk to generally. If you look around the world, the US economy, because of its huge final demand, go back to that consumer spending, because of its ability for lower taxes and bonus appreciation, favorable

4:00 business conditions, and it’s rule of law and its ability to get things done, is where people want to put their money. And so the administration of President Trump have been able to convince people to make outsized investments and parts of the negotiations about teriffs. But that’s over and above just the general companies around the world saying hey,

4:18 there’s great growth in America and I’m going to invest again against it because I can get a return on my investment. And American capitalism works. So you’re seeing tons of investment coming to this country out of the United States clients, but importantly by our US companies investing more deeply in their own manufacturing and repatriating some manufacturing and

4:38 other capabilities. All that’s great news for American economy. Now we have to be careful because we have to make sure we have the labor demand of the labor inputs that customers need. If you talk to some of our small medium sized businesses, they’re worried about getting labor and that’s why you’re seeing some tightening in the labor market. Frankly,

4:55 even as jobs aren’t forming, using the unemployment rate go down. And I think that’s something that we have to make sure that we have the ability to get done. I mean construction jobs, some of the retailing jobs, some of the manufacturing jobs. Have got to make sure we’re training people to do those jobs as fast as we can.

5:09 Speaker 1 We have enough labor to supply all those companies.

5:13 Speaker 2 Well, the population United States is bumps around and doesn’t grow with that. Immigration and immigration done right I think has been a good thing for America, and we’ve got to figure all that out and administrations in the middle of try to figure that out. But if we get people, if immigration done right with kinds of colleagues coming from

5:32 around the world to help us grow our economies, either by knowledge workers or by a general labor you know, that’s something that the country has been good about. It just it’s swung too far and now it swung back and I think it’ll have to work itself out. That’s what our business leaders are telling us. They need to

5:46 make sure they can get those labors. And if you’re talking about construction industries and things like that, they’re full employment because the massive AI build out and other things are driving a lot of construction work as well as the general investment in housing, which is well needed Big America.

6:01 Speaker 1 You guys get a lot of reports and you’re the CEO, and in these AI tokens that what do you see? What is the pulse of what you’re seeing?

6:14 Speaker 2 Well, so if we look at AI across our company, we’ve been deploying it for a good number of years, including our product called Erica, which is an AI agent interface. It’s been out since twenty eighteen, has twenty million consumers using it. So we can see this works and works well.

6:30 But as you back up and think about the other way, you know, what could it do if these token costs out control or your cost get out control? So what’s the what’s the measure between those two things. It’s it’s fairly straightforward. Each of our implementations of AI has to have a business case and has to have a return.

6:46 So if our costs go up, our revenues have to go up to cover it, or the efficiency the process has to cover it. So that’s how we look at it. Now, do we have token costs going up in some areas, Yes, in our computer code coding areas because they use the models that are more cast to help them do their job.

7:01 But in other areas we have access to subscription based models, and then we have a process where we optimize model usage. So this is something people woke up to and I think they’re sitting there saying, wait a second, I don’t need the Ferrari to go down sixth Avenue, And so they’re starting to figure out, well, maybe we can use

7:18 models which are not as costly, we can use them a different way. So I think this will all balance out over the next period of time.

7:23 Speaker 1 Here. Now, there’s all kinds of headlines on AI cyber hacking. Give us the pulse of what you see as one of the major banks in the United States.

7:37 Speaker 2 So if you back up into cyber hacking and all the things that go on, I’d say the following one is we have a great team at Bank of America, three thousand plus people work on a full time there’s not a restriction on their budget. They got to keep this company safe, our teammates safe, etc. So that’s sort

7:54 of the backdrop. What the AI models do is give a person a chance to be much more efficient at hacking or are spoofing or creating AI generated people, or to try to fool people and everything else. So that’s what we’re watching on. So these new models, the power in them and running against your systems and finding what

8:16 they call vulnerabilities and patching them faster. Corporate America, corporate worldment, government world, everybody has had to turn a lot faster. And I think, well, a lot of debate in the public domain is trying to get a balance to say, if you keep introducing these models and they can do this kind of work, don’t we have to have guardrails

8:34 on them. And then they put guardrails on them and they don’t work. So there’s a lot of dialogue going about should there be more policies about this? But the reality is when you a company like ours, you just have to continue to deploy resource and the talent we have in order to keep it safe. But it’s a

8:46 serious issue. We all have got to take very seriously, including people that are listening on their personal lives to make sure they don’t fall victim to these AI capabilities, which are pretty remarkable terms imitating people and things like that.

9:00 Speaker 1 With us today is Brian Mornihan, the president and CEO of Bank of America and Bank America and you we know each had almost twenty years. You’ve always been worried about people. And you made an announcement last week or the week before you’re spending two hundred and fifty million dollars per year on weight loss modifications because you feel

9:26 that in the long run that you know, you have to get of course and go down. Can you tell us about that?

9:33 Speaker 2 So, you know, these jlp ones, threes, et cetera came on stream three you know, three years ago, four years ago. Uh, you know, they’ve exploded usage in the population generally in our teammates and and so we basically people have to get a prescription, they have to have certain conditions to make sure that they can help them. But our strong

9:55 belief is we believe we need to make sure these are available to our teammates so they can take advantage of them. So as what we’ve seen is We’ve always had a great wellness capabilities our company, our teammates are doing the step campaigns. We’ve had weight loss management. We do biometric screening. If you want, you get five hundred

10:12 dollars off your healthcare premiums to do that. We’re self ensured, but we still have charge people premium, so to speak. And so when they do that, if their BMI is higher the other indications, we get a coach and they work with them. So this is all part of a broader picture. The reality of these drugs is they’re pretty remarkable.

10:30 What the quick impact they have on weight and diabetes and other matters, and what they’re finding out more which makes it even more interesting is they have unexpected might not be too strong a word, but to have impacts on cardiovascar risk and things like that faster than people thought they would have and therefore may avoid is emergency

10:51 room and things like that. And so we believe it’s a great investment. A lot of people say, well, if I give it to the teammates today, you know, thirty years from now, they may not a knee replacement because their ways to be managed differently. That may be true, and they may not be working for us, but that

11:06 doesn’t make it. We need to do it today and so it’s part of being a great place for teammates to work. And so we’re proud to support our teammates and everything to do, especially on their wellness journey.

11:16 Speaker 1 Brian Mornahan, last December, I made a prediction, and I was strictly my opinion it was going to be seventy dollars a share this year. And you know, I mean, I see it getting there and I see it maybe exceeding it. So I might be wrong on the low side, but Brian mornihan, you’re doing a great job. Thank you

11:36 for what you’re doing for America. Thank you for what you’re doing for all Americans. And you’re in the consumers and your teammates, and we hope to catch up with you again real soon.

11:48 Speaker 2 Thank you, John, and have a good weeknd