Brian Moynihan, chief executive officer of Bank of America (NYSE:BAC) announced some changes at the top of the management team.
Profits at Bank of America have been relatively modest over the recent term because of large legal settlements and because cost cutting has been effective but not dramatic. Furthermore, Bank of America's recent performance has not declined as much as some of the other large banks because trading revenues did not play such an important part of the bank's earnings.
David Darnell, formerly co-chief operating officer of the bank has relinquished his position and is moving up to become vice-chairman of the board. Thomas Montag, former co-chief operating officer, will now become the sole chief operating officer of the bank.
The reason given for the change is that Mr. Darnell asked Mr. Moynihan several months ago to make a change in his role so that he and his family could move to Florida.
The announcement was low key and basically devoid of any information of a strategic nature. Just a moving of jobs.
This seems to be the way Mr. Moynihan operates…which in itself is not a confidence builder.
Mr. Moynihan is a lawyer and many times acts like a lawyer. Don't reveal anything to investors or the marketplace.
That leaves the investment community to make up stories about what Bank of America is all about.
Mr. Darnell was formerly responsible for consumer units and will continue to report to Mr. Moynihan as the vice-chair but will still lead the wealth-management and business-banking units. Mr. Darnell, was in charge of investment banking and internal units that dealt with business clients and institutional investors.
Along with these changes, Mr. Moynihan announced that Dean Athanasia, the head of preferred and small business banking and Thong Nguyen who leads the retail banking operation will join the management team and report directly to Mr. Moynihan.
Mr. Moynihan had basically no more information than this to pass out.
Mr. Darnell had been at Bank of America for about 35 years and has spent most of this time working in retail banking. In recent years he had been the person directing the re-organization of the bank's product line and its branch system.
Mr. Montag, on the other hand, had a lengthy stay at Goldman Sachs Group, Inc. (NYSE:GS) and moved to Merrill Lynch just before Bank of America acquired it in 2009. His background was in sales and trading. At Bank of America he moved further into the investment banking business and had charge of merging the Merrill Lynch organization with the Wall Street part of Bank of America.
In recent years, the consumer/retail banking side of the company seemed to lag as economic growth remained modest. The investment banking side seemed to prosper as Bank of America became an industry leader in deal-making and corporate banking.
My concern about the lack of information in the announcement is that with the elevation of Mr. Montag to the full position of chief operating officer, Mr. Moynihan placed someone from the investment banking side of the business into this lead spot. And, this person has a strong background in trading.
My concern with this is that banking is changing. In placing Mr. Montag into the chief operating officer's position, is Mr. Moynihan signaling that the future of Bank of America is more in the investment banking area and less in the banking side of banking.
Of the major banks with investment banking histories, Morgan Stanley (NYSE:MS) seems to be benefiting from a reduction of its reliance on trading and some other investment banking areas to focus on the more stable parts. These would include wealth management and advisory services.
So, Morgan Stanley is moving one direction. Wells Fargo (NYSE:WFC) is moving in another. And, we have all the other changes that are impacting the industry coming from the advancements in information technology.
With Mr. Montag coming into this crucial position, does this mean that Bank of America will tilt more toward the investment banking areas…into areas that others are leaving because of the changes they see coming in the future.
If it is not obvious yet, am not a big fan of Mr. Moynihan. He is a lawyer by training and maybe he was the right person to have at the top when there was so much litigation to handle resulting from some of the acquisitions made by previous management. I don't believe that he is the person to lead Bank of America further into the twenty-first century. He seems like he is looking back in history rather than forward.
These changes in the upper management of the bank are important changes. Yet, we get no message from the top as to how the changes will impact the future of the bank. This, to me, is a failure in leadership.
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