BofA's New CEO Takes the Reins, Saying 'Tough Lessons' Have Been Learned
Bank of America is emerging from a tumultuous year spent battling several investigations from Congress, state attorneys generals, regulators and a host of shareholder lawsuits. Much of these question the circumstances of the bank's $50 billion purchase of broker Merrill Lynch and the payment of more than $3 billion in bonuses to its employees as the company was reeling from record annual losses totaling $27.6 billion.
Besides restoring morale at the firm's various divisions, Moynihan will also have to show how he plans to realize the potential that drove the acquisitions of Merrill and Countrywide Financial, the mortgage broker that the bank also bought in 2008.
"The Merrill acquisition elevates the level of complexity at an already complex firm," says Walter Todd, a shareholder and portfolio manager at Greenwood Capital, which manages $775 million in assets. Todd says that another key challenge for Moynihan will be maneuvering the behemoth financial company through tough economic times.
With the country's unemployment rate is over 10%, the bank's customers are clearly hurting. In the third quarter, its credit card business posted losses totaling $5.47 billion, compared to losses of $2.9 billion the year before. The mortgage business hasn't recovered either and it has kept aside $38.46 billion for future losses at the overall bank. The bank releases its fourth quarter earnings on Jan. 20.
Moynihan, who headed the consumer operations of the bank, is aware of what he's up against. "The economic hole we're climbing out of is very deep...Getting out will not be easy -- and it will take time," he said in the speech. "We still have a way to go before we can pop the cork."
He also has big shoes to fill. Moynihan, who joined the bank as part of a 2004 purchase of FleetBoston Financial, replaced 62-year-old Kenneth Lewis, a 40-year veteran at the bank. Though Lewis' last year as CEO was tarnished by investigations and hearings, he was widely admired internally and in the industry for his operational prowess.