BofA looks to rein in costs after staffing up for PPP
Bank of America is working to bring its expenses back into the range it projected for the year after costs soared in the rush to deploy loans to small businesses through the government’s Paycheck Protection Program, Chairman and CEO Brian Moynihan said Wednesday.
The Charlotte, N.C., company said in April — just as the Small Business Administration’s emergency program was being launched — that expenses for the year would top out at $53.5 billion. But the scramble to push PPP loans out to businesses shuttered by the coronavirus pandemic quickly boosted costs, Moynihan said at an investor conference Wednesday
“To get done what the government wanted us to do on PPP, we had to put on several thousand extra people, through consultants and others to process 320,000-plus completed loans we have,” Moynihan said.
Moynihan said that one area where BofA can offset some of the added expenses is in employee travel, which has been largely curtailed during the pandemic. But without getting specific, Moynihan said that some investments could be delayed as the bank looks to rein in costs.
“There might be some projects that get pushed out,” he said.
Moynihan did say that the bank has ruled out laying off staff this year and warned that second-quarter expenses will be elevated.
“We’re working it down,” he said. “But it’s a little hard to make up for it in a single quarter.”
As local economies open back up, Moynihan said, the bank is starting to see evidence of consumers spending again. While April spending, which was measured by card transactions, ATM withdrawals and peer-to-peer payments, had declined 27% year over year, May spending is down just 5% from one year earlier.
Moynihan also said that the bank is seeing signs of recovery in the health care sector. Many doctors’ and dentists’ offices were closed after states implemented stay-at-home orders and roughly 20% of BofA’s health care clients have asked for deferrals on loan payments, the CEO said. But in a recent survey of those businesses, about 70% said that they were back up and running.
“It was just a momentary, complete surprise interruption of cash flows,” Moynihan said.