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BofA's Moynihan: US stocks higher because 'where else is the money going to go'

Chris Keane | Bloomberg | Reuters

Bank of America (BAC) chief Brian Moynihan told CNBC on Thursday the U.S. stock market keeps heading higher because there's no where else to get returns globally with low to negative interest rates.

"Where else is the money going to go, with dividend [stock] yields exceeding sovereign [bond] yields? The money is going to go into the equity markets because they're looking for return," he said.

Moynihan, appearing on "Squawk Box," argued that no one sees a rapid rise in rates by the Federal Reserve or in the bond market. With inflation low, there's no need to spike rates higher, he added.

Higher rates allow banks to make more money on loans. For every quarter percentage point increase in rates, BofA stands to add about $1 billion to earnings, Moynihan said. But he added the bank is prepared for any rate scenario.

Moynihan said BofA remains committed to continue to reduce expenses, and technology helps. "If you think about the second quarter of '16 versus second quarter of '11, we take out $20 billion of operating expenses on an annual basis."

Last month , Bank of America reported second-quarter earnings and revenue that beat expectations. But adjusted profit of 36 cents per share was 20 percent lower than a year ago, and quarterly revenue of $20.6 billion was off 7.6 percent.

BofA shares have struggled this year, down nearly 7 percent as of Wednesday's closing. The stock has also had a rougher ride than its peers since the financial crisis.

"We had a war to fight that few other people had between cleaning up the mortgage mess: the cost-structure [and] the litigation," Moynihan said. "The war is over. And we can declare that over. But we learned the lessons from that war, that's what we keep applying."

"We had to issue a lot more shares during the crisis than our peers had to do," he added. "We're in buying the shares. And so we're starting to bring the share count back down."

Moynihan said his job as CEO is to maximize profit, but also to buy back stock when the price is right. "If people give it to us at this price, we'll buy it all day long."

"At about $160 billion of market cap, we run at about book value," Moynihan said. Book value, or net asset value, is a measure of total assets minus intangible assets and liabilities.

"The consumer loans that we're putting on today, I'd say, compared to a year ago are pretty much the same, compared to 10 years ago much better quality," he added.

Moynihan sees growth opportunities, but stressed the importance of "responsible growth." He admitted: "Our industry, and our company, have a history of good times growing by reaching for credit and reaching for terms."

As an example of "responsible growth," Moynihan said BofA needs to do a better job converting its own qualified customers because only 3 in 10 get mortgages through the bank.

"It used to be two. We moved that up dramatically," he said. "But between three and nine, ... these are our customers who are getting mortgages somewhere else."

"The consumer is in very good shape; credit quality-wise, spending-wise," Moynihan said. But he feels commercial lending has more potential.

"The middle market companies are making money. The credit quality is as good as it's ever been. They are drawing on [credit] lines higher than they did last year at this time," he said. "But they're not being aggressive. So loan growth is there. We have to fight for it."

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