Clearly, Brian Moynihan hopes to follow a tough year with a much more solid performance.
“We are a straightforward company,” he says convincingly. “We serve people, companies and investors. There’s nothing we need. It’s all here.”
Moynihan, who took the Bank of America helm January 1, sat in a conference room on the 58th floor of the bank’s Corporate Center recently and discussed a wide range of topics.
The nation’s biggest bank is a player at home and abroad, but travails related to what Moynihan calls the roughest recession in 70 years made 2009, as he wrote in the annual report, “a difficult year by almost any measure.”
The bank’s net income was $6.3 billion, but after paying off its $45 million loan from the Troubled Asset Relief Program and dealing with other fiduciary obligations, its net loss was 29 cents a diluted share.
Enumerating challenges, Moynihan first turns to fixing the credit environment. Prominent is taking responsibility.
“We missed the mark and put out too much consumer credit,” he admits. “We kept offering credit to many consumers who were getting over-extended. Unfortunately, that led us to take a lot of charge-offs.”
Provision for credit losses in 2009 was nearly $49 billion.
Credit has been scarce because those companies whose leaders could have negotiated loans, he says, are not seeking additional credit and, in many cases, aren’t using the credit lines they already have. Simultaneously, those businesses who clamored for credit, couldn’t justify it.
“For very small businesses, $2 million a year and under, our charge-off rate in third quarter 2009 was 17.5 percent,” Moynihan says. “That’s almost one in every five that failed that quarter.
“It’s a mixed picture. Small manufacturing firms, along with accounting operations and law offices, are doing well, but companies in the restaurant, construction or small retail segments are gasping to stay afloat.”
Economists have declared the recession ended, but Moynihan says, “There may be economic growth, but it may not feel good as long as unemployment remains high and consumers are still de-leveraging.”
Positioned For Growth
Moynihan has positioned his management team to better address future growth. Veteran Cathy Bessant now leads both technology and operations, reuniting those functions. Former chief financial officer Joe Price runs the consumer business that now also includes the credit card operation.
Price oversees 58 million consumer and small business relationships.
“We have all these customers, and they have a credit card,” Moynihan says. “With Joe, we’ve brought the credit card business and the products together. We’ve got charge-offs under control and that business is starting to heal.”
For residential mortgage, Moynihan points to increased housing stability and adds that unemployment has stopped growing.
“We’ve got a group of customers who over-leveraged,” he says. “For people who have to get out of a mortgage, we’ve got to figure out how, with dignity, to assist them as they transition into a housing arrangement they can afford and that they can stay in for the next 10 years.”
Commercial mortgage is a better situation. “I’m not sanguine on it,” he says, “but I think we’ve done a good job there and I don’t think it is the risk for us that other people think it is.” Charge-offs are dropping, he points out.
For wealth management, Moynihan’s bullish.
“The two largest in the business were legacy Bank of America and legacy Merrill Lynch. We’ve put them together and it’s a business which is second to none,” he says of the controversial and expensive purchase of the giant investment firm.
To those who complain about the subsequent slides in stock price and profit, as well as the federal bailout, Moynihan offers strong justification.
“We had a great wealth management business; it just wasn’t big enough. And now we have the two largest players in the country and we still have room to grow that business,” he says. “It has brought the capabilities of size and scale and gives us a chance to add better products and better capabilities.”
The company reported solid first quarter results, posting net income of $3.2 billion on declining credit costs and strong sales and trading results.
In concert with the commercial and corporate banking units, Moynihan adds, product delivery synergies multiply. And on the investment banking front, the deal brought coverage of a wider range of industries.
The other complication of Merrill Lynch was legal problems. “Our legal situation doesn’t preoccupy us,” says Moynihan, the bank’s former general counsel. “We will work with all investigations.”
Discerning Its Role
Does that signal Bank of America is ready to get along better with the federal government?
According to Moynihan, “The bank will approach the government as ‘an expertise giver’ rather than taking the position that ‘what we are doing is right and everybody else is wrong.’ That’s not true, and it’s not helpful. It’s in our best interest if America works well. Our own success depends upon a healthy economy.”
Moynihan’s strong on the bank’s global businesses—the corporate and investment bank, wealth management and capital markets. He sees upside to the bank’s opportunities in Asia, including in China where the investment in China Construction Bank has been successful for both companies.
So how does the leader of an institution with more than $2 trillion in assets feel about the “too big to fail” doctrine? Moynihan points out that the recession’s initial casualties were investment houses rather than traditional banks. Still, he says, “Nobody should be too big to fail.”
Then he extols the virtues of size. “What we can do at Bank of America is really helpful to our customers and clients,” he says, citing the bank’s recent decision to stop allowing debit card overdrafts, which often happen without the customer being aware and therefore incur a fee unnecessarily.
“Our size allows us to do that,” he says.
“We are the largest bank in the largest economy,” he adds. “If we are going to be successful in the worldwide stage, America is going to have to have large financial institutions.”
Moynihan arrived at Bank of America through its purchase of FleetBoston Financial Corporation in 2004. He lives in Boston with his wife, a former lawyer, and three children in high school and middle school. He recently rented living quarters in Charlotte, but plans no move.
The oft-asked question arises: Will Charlotte retain the bank’s headquarters? “I think I’ve answered the question on numerous occasions,” he says firmly.
“Charlotte will be important in terms of headquarters and in numbers of employees,” he says, with a caveat. “There is also an employee base and clients everywhere. And if you’re sitting in St. Louis, you want to know what we’re doing for St. Louis. In Chicago, it’s Chicago; Dallas, Dallas.”
He speaks of supporting Charles Bowman, the bank’s North Carolina and Charlotte market president, then mentions the Charlotte Chamber’s annual educational visit, this year to Boston. He and Dick Spangler co-chair the mid-June trip. Prominent in the excursion is David Darnell, the bank’s president of Global Commercial Banking, who leads the Charlotte Chamber, and Bob Gallery, the bank’s Massachusetts president, who chairs the Greater Boston Chamber.
The situation cheers Bob Morgan, Charlotte Chamber executive. “Boston is a Bank of America town,” Morgan says. “Who better than Brian and his team to open doors to help us learn from this great city?”
Culture, Morale Remain Strong
Some observers speculate that the bank’s culture and morale have sustained harmful hits during recent hard times. Moynihan sees a different picture.
After adding 60,000 associates from Merrill Lynch and 40,000 from Countrywide Mortgage, total bank employment pushes 300,000. Though the culture evolves, it’s firmly grounded in “doing the right thing, trust and teamwork,” he says.
“The associates are in the game,” he says of morale. “They’ve done tremendous work for us in tough circumstances. What they are doing is what they do best, and that’s take care of clients. The customer focus is absolutely critical because that’s all we have to do. There is nothing left for us but to execute for each customer and client and deliver all we are capable of providing them.”
Moynihan grew up in Ohio, graduated from Brown University and got his law degree from Notre Dame University. His grandfather was a lawyer and he always thought he would be, too. He joined FleetBoston in 1993, coming over from a Boston legal firm that served the bank.
He almost left Bank of America a couple of years ago. “We had to downsize the bank,” he jokes matter-of-factly. “I was going to help do that.”
Instead, he took the general counsel role offered by ex-CEO Ken Lewis.
Until recently, he didn’t give much thought to being chief executive. “I always thought I had to do a good job of leading and managing the group I had,” he says. “If you try to plan your career from start to finish, you will be disappointed 99.9 percent of the time. Just take what comes to you.”
At 50, Moynihan figures to enjoy a long run at leading Bank of America. He doesn’t comment on the bank’s messy process for finding a successor for Lewis, who announced his retirement abruptly in September 2009. But he acknowledges his responsibility to identify successor candidates.
‘All Things in Moderation’
Moynihan readily admits to having benefited from mentors. He mentions former FleetBoston CEOs Terrence Murray and Chad Gifford, as well as Lewis. All helped him form a set of principles. The first is, “All things in moderation. Never lean the company too far one way or the other.”
Then he lists others: “Never believe in yourself too much, and be dispassionately objective.” He calls that “a tricky thing,” balancing enthusiasm and optimism with the responsibility to say no to trusted lieutenants when plans don’t measure up.
He moves on. “You have to be flexible. I’m facing a different task than Hugh McColl faced or Ken Lewis faced.”
Contrasting his style with that of Lewis, he calls his predecessor “very disciplined.” Then he speaks of the difference. “I’m incorporating a broad group of people because we’re in a different phase. We’re not buying things, we’re not merging things. It’s a phase where it’s really an organic growth company. So it’s a different set of conditions.”
Lest that sound insular, Moynihan transitions to helping the country out of its unemployment funk. “The dialogue is not always about that,” he says. “We’ve got to get that dialogue focused. It’s surprising to me how needed it is to have the right kind of leadership in all arenas to actually get Americans back to work. That ultimately will stabilize the economy.”
And it will help the bank. “This has always been a great company,” he says. “As the economy heals, you’ll see that come through in terms of dollars and cents.”
Applying that thought locally, he leaves a message for the greater Charlotte business community: “We are here to serve business people’s needs. If we aren’t doing that, they should let me know.”