For the first time in nearly five years, Bank of America Corp did not rely on co...
) did not rely on cost cuts to amplify profits – the latest sign of big U.S. banks prioritizing investments in their businesses over short-term gains.
But overall, the bank’s net revenue was nearly flat, as were core expenses. The difference between those two figures, known as operating leverage, is watched closely on Wall Street as a barometer of how well a bank manages costs. Its U.S.-centric consumer business opened 20 new locations, renovated another 117 and paid retail employees more after a pledge to boost minimum wages to $15 an hour. Bank of America also opened a new Paris office, hired more customer-facing staff and spent on digital tools across its operation.
Bank of America, the second-largest U.S. lender by assets, does not stand alone in prioritizing business investments over cost cuts. Citigroup Inc management also faced questions about winnowing operating leverage. The bank, which reduced headcount by 7,000 over the past year, has been keeping a close eye on travel expenses while avoiding what its finance chief called “non-critical hires.”
Spending in the face of revenue pressure is a sharp reversal for the U.S. banking industry after years of cost cuts following the 2007-2009 financial crisis. For Bank of America, it also marks a new chapter for CEO Brian Moynihan.
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