BofA's CEO faces a stress test of his own from im­pa­tient in­vestors

The Pak Banker - - COMPANIES/BOSS -

When Bank of Amer­ica Corp share­hold­ers gather next month to de­cide if Brian Moyni­han can keep his chair­man ti­tle, they won't be the only ones about to weigh in on his ca­reer.

The Sept. 22 vote comes a week be­fore the bank has to prove it has a firm grip on risk as it re­sub­mits a cap­i­tal plan to the Fed­eral Re­serve. If the Fed finds the len­der didn't fix weak­nesses dis­closed in March, it could crimp div­i­dends or share buy­backs for the third time dur­ing Moyni­han's ten­ure as chief ex­ec­u­tive of­fi­cer.

That's al­ready a sore point for in­vestors get­ting one of the small­est pay­outs among U.S. banks. "If they fail this time, I'd call for his head," said E.E. "Buzzy" Geduld, who owns 2.5 mil­lion Bank of Amer­ica shares as head of New York­based hedge fund Cougar Cap­i­tal. "At the very min­i­mum, you split the CEO and chair­man roles, and I'd like to see some­one from the out­side who's smart enough and strong enough that Moyni­han's go­ing to have to an­swer to."

Moyni­han, 55, is deeply in­volved in the re­sub­mis­sion, lead­ing weekly steer­ing meet­ings on the topic, ac­cord­ing to two peo­ple with knowl­edge of the projects. The bank is spend­ing sev­eral hun­dred mil­lion dol­lars over­haul­ing sprawl­ing data sys­tems, re­build­ing data­bases so the ori­gin of in­for­ma­tion is clear and en­hanc­ing con­trols, the peo­ple said. Larry DiRita, a Bank of Amer­ica spokesman, de­clined to com­ment and said Moyni­han wouldn't be in­ter­viewed for this ar­ti­cle.

The board is ask­ing share­hold­ers to rat­ify a change in by­laws last year that al­lowed Moyni­han to be­come chair­man. Bank of Amer­ica's sub­mis­sion to the Fed is due Sept. 30. Even if Moyni­han clears the first hur­dle, he can't af­ford to dis­ap­point in­vestors with another stum­ble in the Fed exam.

His long­est-serv­ing chief fi­nan­cial of­fi­cer, Bruce Thompson, stepped down last month af­ter pre­sid­ing over two of the firm's un­suc­cess­ful stress tests. In­vestors say that means Moyni­han would own full re­spon­si­bil­ity for another fail­ure.

One worry within the bank is that reg­u­la­tors haven't spec­i­fied what they want, leav­ing ex­ec­u­tives un­cer­tain their work will be deemed sat­is­fac­tory, ac­cord­ing to a per­son in­volved in the ef­fort. The over­haul spans a half dozen projects across the Char­lotte, North Carolina-based firm's in­stitu- tional and con­sumer busi­nesses, the peo­ple said.

Bank ex­ec­u­tives de­scribed the changes as shift­ing from as­sum­ing their risk mod­els are ac­cu­rate un­less proven oth­er­wise to the op­po­site, which re­quires more rig­or­ous at­ten­tion to the data un­der­ly­ing mod­els. The firm is scour­ing data from com­pa­nies it has ac­quired, af­ter a 2014 stress-test stum­ble was caused by mis­takes in in­for­ma­tion from Mer­rill Lynch & Co. dat­ing back years, another per­son said.

In his sixth year as CEO, Moyni­han ap­pears to have fi­nally shaken the lit­i­ga­tion costs tied to his pre­de­ces­sor's 2008 pur­chase of Coun­try­wide Fi­nan­cial Corp. Buy­ing the big­gest U.S. mort­gage len­der just as the hous­ing bub­ble burst sad­dled Bank of Amer­ica with a litany of le­gal dis­putes, fu­el­ing most of the bank's $70 bil­lion in post­fi­nan­cial cri­sis le­gal costs. Clean­ing up the mess has been what Moyni­han called his big­gest ac­com­plish­ment to date. He's also cut ex­penses while at­tempt­ing to re­verse a drop in rev­enue by boost­ing cross-selling be­tween re­tail, wealth­man­age­ment and cor­po­rate-lend­ing units. The firm made progress in the sec­ond quar­ter, re­port­ing that profit re­bounded to $5.32 bil­lion.

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