As I sit here working on my investment pitch for Bank of America for the SMIF class, I can’t imagine a better person to have lunch with right now than Bank of America’s CEO, Mr. Brian Moynihan. Mr. Moynihan is a graduate of Brown University and the University of Notre Dame School of Law. In his 20+ year tenure at Bank of America, he has held a number of different leadership positions before assuming the title Chairman and CEO in 2010.
During the financial crisis, Bank of America received the largest sum of bailout money among banks: a modest $45 billion. The company was near bankruptcy, crippled by toxic mortgage assets on their balance sheets from subprime loans. The company was losing its reputation as a sound financial institution, and the recent cash stipend from the US government signifying them as a “too big to fail” financial institution isn’t exactly a resume builder.
The bank made two key acquisitions in 2008 with the purchase of Merrill Lynch and Countrywide Financial. Merrill Lynch was also crippled by the financial crisis and was in essence ‘saved’ by the graces of BoA. Countrywide, a mortgage lender and one of the top subprime lenders leading up to 2008.
In 2010, Moynihan assumed the reigns of a massive institution that was still wrought with huge problems. The firm continued (and has since continued) to face massive litigation from the US Department of Justice and Federal Housing Finance Agency. In 2010, Bank of America reported a net loss of $2.24 billion, most of the charges linked obviously to the Countrywide acquisition.
In 2011, Moynihan introduced a program called the New BAC. This large cost-cutting undertaking was characterized by reductions in operating expenses like headcount, streamlining the business units of the organization (aligning businesses to customer groups instead of by revenues), and selling underperforming assets to strengthen capital and liquidity ratios.
I would love to be able to sit down with Mr. Moynihan and ask about how he went about this huge endeavor of improving the company and its reputation. His commitment to returning value to shareholders is also admirable. I would relish the opportunity to ask him about any challenges that still lay ahead for the company, and ask him where he thinks the market is headed. He is a great CEO and I wish him the best of luck with his company.