Bank of America Corp. is "very comfortable" with the composition of its corporate investment portfolio, which is invested mostly in government-guaranteed mortgage bonds and U.S. Treasuries, Chief Executive Officer Brian Moynihan said at an investor conference on Monday.
Moynihan was asked about the bank's investments following JPMorgan Chase & Co's disclosure this month that it lost at least $2 billion on a trading strategy by its Corporate Investment Office. Bank of America buys insurance-like protection on some loans to large companies, but does not make broader credit hedging bets at the corporate level, he said.
Bank of America held debt securities of $297 billion at the end of the first quarter, according to the bank's quarterly filing with the U.S. Securities and Exchange Commission.
Financial markets have been able to absorb the news about JPMorgan's losses, Moynihan said, adding that there has not been a shutdown in activity like during last year's European debt crisis.
"It has caused great concern in the market, but I don't think it's disrupted the markets," Moynihan said. JPMorgan CEO Jamie Dimon has the skills to negotiate his bank through its troubles, he added.
Meanwhile, in Bank of America's mortgage business, Moynihan said the bank's cost to collect payments on loans and to work with struggling borrowers - about $3 billion per quarter - is peaking as delinquent loans continue to subside. These costs, however, will not come down significantly until next year and 2014, he said.
The bank is also looking to make more mortgages directly to customers after its market share slipped to about 4 percent in the first quarter from about 5.5 percent in the previous quarter, Moynihan said. Originations are up about 20 percent this quarter as the bank hires more loan officers, he said.
To boost profitability, Bank of America has been working to cut expenses as part of a company-wide program called Project New BAC. Planning for the second phase of the initiative, which focuses on capital markets and wealth management operations, has been completed, and the bank will disclose its expense targets shortly, Moynihan said.
In the first phase, which covers consumer operations, the bank aims to eliminate $5 billion in annual expenses and 30,000 jobs. The second phase is expected to produce less savings and fewer job cuts because those businesses are more efficient.
As an example of the bank's efforts to streamline a company that expanded rapidly through acquisitions, Moynihan said Bank of America recently finished merging California accounts into the same computer system used for other U.S. customers, a task that had been in the works for nearly 15 years.
The bank is also selling some of the buildings it owns as part of Project New BAC. Bank of America is under contract to sell the Fifth Third Center office tower in Charlotte, North Carolina, bank spokeswoman Jennifer Darwin said Monday, declining to name the buyer. That means the bank has found buyers for the three buildings in Charlotte and New York that it put up for sale earlier this year.
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