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Bank of America Corp.'s (NYSE: BAC) decision to appoint Brian Moynihan as its next president and chief executive officer puts the pressure on Moynihan and the bank's board of directors to prove to investors that the company is serious about changing direction.
Moynihan joined Bank of America via its 2004 merger with FleetBoston Financial and has held several positions since. While technically an insider, Moynihan sits outside BofA's executive circle in Charlotte, N.C.
"This is a real break with the past," Tony Plath, a finance professor at the University of North Carolina and a close follower of BofA's many executive "tribes" told The Wall Street Journal. "It signals to the market that the FleetBoston guys are in charge of the bank now."
While that may be encouraging to investors looking for change at the country's largest bank by assets, Moynihan doesn't foresee any "big changes" in strategy, he told The Journal yesterday (Wednesday) after his appointment. And despite suggestions by at least two external CEO candidates that BofA should consider breaking itself up, Moynihan says he doesn't intend to exit any of the company's current businesses.
Three BofA board members are former FleetBoston executives, including Chad Gifford, who was CEO of FleetBoston before its merger with BofA. Plath argues that Moynihan's inexperience and relatively young age of 50 means he'll lean heavily on the board to run BofA's consumer banking business, which has 6,000 branches, 18,000 ATMs and almost $1 trillion in deposits.
Moynihan is currently in charge of BofA's retail banking division, but has only held that responsibility since August. Outgoing CEO Ken Lewis and his predecessors were all groomed in this division, but Moynihan – a trained lawyer – has most of his background in investment banking.
Still, Moynihan isn't the answer for BofA, says Money Morning Contributing Editor Martin Hutchinson, an investment banker with more than 25 years of experience. The best move for BofA would have been to lure Citigroup Inc.'s (NYSE: C) Vikram Pandit, who has the much-needed skills to run BofA's Merrill Lynch & Co. Inc. investment-banking unit, Hutchinson argued in a recent column.
Bank of America "needs someone who can run Merrill, and Moynihan can't," Hutchinson said today (Thursday) in an interview.
"This is a guy who is a tentative leader," UNC's Plath said in his interview with The Journal. "I watched him testify in front of Congress (last month). He didn't know who the bank's largest investor was. That scares me. He has to look over at Gifford (a BofA board) member looking for approval to answer the questions. He has to be in the same league now as Jamie Dimon. I don't know if he's there yet. I don't know if he's even in the same league as Vikram Pandit."
News and Related Story Links:
- The Wall Street Journal:
Moynihan Pick Breaks BofA's "Charlotte-based Mafia."
- The Wall Street Journal:
BofA Breakup is New Snag in CEO Hunt
- Money Morning:
Citi's Pandit is the Right Man For the Job – at Bank of America