(Bloomberg) -- As he turned 65, Bank of America Corp.’s Brian Moynihan took the stage at a town hall meeting and sent a jolt through the crowd, saying he wants to still be CEO when the stock eclipses $100.
The comment, delivered with a wry smile, turned heads not only because the share price is currently $45. It underscores how long the man on track to become the industry’s senior statesman plans to savor his status.
Among the four giants of US commercial and consumer banking, Bank of America stands out — as status quo. It’s the only one that’s not undergoing a sweeping overhaul or publicly inching toward a change at the top. Moynihan, who confounded critics by righting the lender after the 2008 financial crisis, is poised to notch his 15th year as CEO and is digging in — with no heir apparent and no sign of deviating from his no-frills “responsible growth” strategy.
For shareholders, it’s an approach that has made Bank of America the 11th-best performer among the 24 major US lenders in the KBW Bank Index over the past half-decade. Analysts expect that by this time next year, the stock may crest $49.
The firm has avoided the regulatory blowups that forced peers such as Wells Fargo & Co. and Citigroup Inc. to focus on costly overhauls. But it has also fallen behind its only larger rival, JPMorgan Chase & Co., on a range of fronts, including Wall Street market share and stock performance. Warren Buffett, Bank of America’s top shareholder, trimmed his stake this year without comment, spurring a debate over its prospects.
“‘Responsible growth’ will be the key strategy for Bank of America — why change it?” said Morgan Stanley analyst Betsy Graseck. “It’s more of the same, but it’s working.”
The next question is whether President-elect Donald Trump’s incoming administration may shake up the financial landscape to Bank of America’s advantage. In an interview with Bloomberg Television on Tuesday, Moynihan predicted an “economic atmosphere of deregulation” that could benefit the industry. That could mean, for example, tempering capital rules to encourage lending.
But for Bank of America, the years ahead could also include other US policy swings that knock more risk-prone competitors off balance.
“The ‘responsible growth’ mantra makes a difference,” said Wells Fargo analyst Mike Mayo. “Any bank is one day, one mistake away from ruining their record. Sometimes slow and steady does win the day.”
Back in his days at Brown University, Moynihan landed a summer job working for a utility, replacing gunky water mains in his home state of Ohio.
It’s a tale he imparts sparingly to close confidants, explaining how he arrived at his management philosophy. Success, he says, is often a matter of creating a system and just running it smoothly.
When Moynihan took over Bank of America, he inherited such a mess that few in the industry gave him strong odds of success.
His predecessor, Kenneth Lewis, made two infamous deals as the financial crisis unfolded — acquiring subprime-mortgage machine Countrywide Financial and agreeing to pay about $50 billion for Merrill Lynch at the brink of its collapse. Buffett was galled, telling a government commission that if Lewis had waited just one more day, he could have scooped it up for nothing. (The takeover closed for $18.5 billion.)
By late 2009, Bank of America’s board was on an intense hunt for a new CEO. It needed someone who could steer the firm over a tidal wave of government probes and legal claims. By Wall Street standards, the pay would be meager, given that the bank was being propped up by taxpayers.
As outside contenders demurred, the board landed on Moynihan — a lawyer by training who in the chaos of the financial crisis had just cycled through a series of senior posts at the firm with little time to make his mark.
‘A Lot of Hits’
During his first two years in charge, the stock cratered, falling below $5 as shareholders worried about whether anyone could navigate its massive liabilities.
Moynihan pulled it off. He struck a $5 billion deal with Buffett to get fresh capital and the investor’s full-throated backing. The CEO paced legal and regulatory settlements, giving the bank time to earn its way out of the hole. He also whittled costs and the workforce, restoring profitability.
The naysayers never swayed him, said Gary Lynch, the bank’s former general counsel.
“Brian was a rugby player,” Lynch said. “He took a lot of hits, which would have taken a lot of people out. But he kept going.”
Buffett’s stake in the bank swelled to more than 13% by this year.
Tempering Risks
Much of Bank of America’s Wall Street workforce mistakenly assumed that as soon as it was back on its feet, risk-taking would ramp up again.
Not so.
The responsible growth mantra Moynihan started invoking around 2015 at virtually every public appearance proved to be serious. When the firm and its peers lost hundreds of millions of dollars on loans that had been backed by shares of a troubled South African furniture retailer in 2018, Moynihan’s team reined in that line of business. Some ambitious executives left.
Over the past decade, Bank of America’s Wall Street operations have lagged further behind JPMorgan.
Non-interest income — an amalgam of revenue from handling trades, corporate takeovers, clients’ wealth and other business — was roughly on par with JPMorgan’s a decade ago. But that income stream has since declined at Bank of America, while rising 54% at its rival.
Last year, JPMorgan’s Jamie Dimon expanded his firm’s wealth management business by buying First Republic, catering to tech entrepreneurs. He also persuaded shareholders to support a big bet on new technology, seeking an edge on competitors that can’t match the spending. That includes a spree of platform acquisitions a few years ago and a swelling tech budget set to reach $17 billion.
Dimon, 68, has indicated that he’s slowly nearing the end of his tenure as CEO — a perch that’s made him the industry’s statesman. In January, he shuffled a small group of senior executives viewed as his top succession candidates to give them more experience.
Bank of America’s succession picture is murkier.
In Moynihan’s early years as CEO, his most obvious replacement was Tom Montag, the former Goldman Sachs executive who later led Bank of America’s investment bank and ultimately became the company’s chief operating officer. But when Montag and Anne Finucane, the bank’s vice chair and most senior woman, departed in 2021, it set off a cascade of openings below.
The company has yet to say which of its rising executives are CEO material.
In an emergency, the likeliest stand-in would be Dean Athanasia, 58, who oversees half the firm’s eight major segments including retail, small business and commercial banking. He and Moynihan use Boston as their main office, commuting from the upscale town of Wellesley.
Future candidates include Jim DeMare, who runs the firm’s Wall Street sales and trading operations, and Chief Financial Officer Alastair Borthwick. Both are in their mid-50s.
DeMare persuaded the bank to entrust his unit with more capital and invest in its systems. Last year, his desk produced 37% more revenue than before he took over in the pandemic. Moynihan has touted its market-share growth and this month expanded DeMare’s role to include research operations.
Borthwick repositioned the firm’s balance sheet, which held too many low-yielding assets when interest rates rose in 2022. Now well known to markets as the numbers guy on conference calls, he previously led commercial banking.
Other long-term candidates include retail banking chief Holly O’Neill and commercial banking head Wendy Stewart, who report to Athanasia.
O’Neill oversees customer service for the lender’s 35 million retail banking clients. The firm’s roster of checking accounts has climbed for 23 straight quarters.
Stewart made an impression during last year’s regional-bank turmoil, when customers rushed to the safety of larger banks. Her unit, serving one of every five US businesses that generate revenue of $50 million to $2 billion, boosted its client base 55% amid the chaos.
Buffett’s Sales
After years of publicly praising Moynihan’s leadership, Buffett started whittling his stake in mid-July without comment. For months, filings showed him selling almost daily, until his holding fell below 10% in October, releasing him from the duty to disclose trades quickly. Markets may not learn whether his spree is continuing until a regulatory filing due early next year.
On stage at a leadership town hall in October, Moynihan struck some attendees as irritated by the topic of Buffett’s selling. It’s possible the financier just wanted to lock in gains or acted on a view of the sector. Regulators discourage major bank shareholders from conferring with management and influencing strategy.
“It wouldn’t be right to speak to him about share ownership when he owns that much of the company,” Moynihan said in a TV interview that month. “He isn’t talking about it, we wouldn’t talk about it. But he’s been a great supporter of our company, and we’ve benefited.”
A month later, after Trump’s election win, Mayo encountered Moynihan at an evening event and was struck: “I’ve never seen Brian Moynihan more engaged and optimistic as I did at that dinner.”
But the Wells Fargo analyst doesn’t expect the CEO’s style to change.
Moynihan “gets to where he wants to go, a few steps at a time,” Mayo said. “He’s not taking big leaps, no grand gestures, no jumping over holes. He’s going to get there, to his destination, and do so without breaking a leg.”
--With assistance from Hannah Levitt and Max Abelson.
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