Bank of America's Moynihan makes Smart Move

Earlier today Bank of America BAC (NYSE) under the new leadership of Brian Moynihan made a smart move. The bank appointed Charles Noski as the new CFO. His appointment will fill the vacancy that has been open for a significant amount of time. Noski, an outsider to the bank, is highly qualified. According to Bank of America’s press release.

Noski had been the CFO of defense contractor Northrop Grumman, AT&T, Hughes Electronics and United Technologies. He has also served as a board member for a number of Fortune 500 firms including Morgan Stanley, Microsoft, ADP and others.

The bank continues to make significant management change related steps to right the ship and start moving ahead. This latest major appointment comes on the heels of a number of management related changes Moynihan has already taken in his short tenure as BofA’s new CEO.

For more:

Reuters

John Thain Gets Second Chance

John Thain, the former CEO of Merrill Lynch, who found his reputation in tatters after Bank of America acquired Merrill in the midst of the financial crisis, has been given a second chance to revive his reputation. Yesterday, CIT Group CIT (NYSE) announced that Thain would immediately become the new CEO and chairman of the small business lender. CIT had gone into bankruptcy under the leadership of Jeffrey Peek who ultimately had to give up his leadership role of the firm.CIT has been a very important lender to small and mid-sized businesses. It finds itself coming out of bankruptcy and hopes Thain can work wonders with the firm. An article in Forbes summed up Thain’s situation with regard to the Bank of America acquisition of Merrill and how it impacted his reputation and firm.

As chairman and CEO of Merrill Lynch, Thain’s deal to sell Merrill was considered a lifesaving move for the company at the height of the financial crisis. But he then came under fire for having paid out $3.6 billion in bonuses to Merrill employees just before the deal closed, and for spending more than $1 million to redecorate his office at Merrill, despite its massive losses.

CIT announced yesterday, as the firm moves out of bankruptcy, that Thain would serve as the firm’s new CEO and chairman. Thain replaces interim CEO Peter Tobin who will remain on the company’s board of directors. The decision to select Thain may actually be a good fit. Thain’s expertise could actually be very beneficial to CIT’s circumstances.

CEO Watch List - Robert Kelley, Bank of New York Mellon

obert Kelley, the CEO of Bank of New York Mellon, who at one point was speculated to be a candidate to replace Ken Lewis as CEO at Bank of America, apparently may finds his own position at risk. Kelley, whose candidacy for the Bank of America CEO position was a frequent on-off affair, was ultimately forced out of consideration for the BofA position, according to a number of analysts, when news came out that he would need to get an exorbitant deal to take the job at Bank of America. There was no way in this current atmosphere that BofA would have been able to move forward with a large compensation/buyout package. Now according to story by American Banking News,

… many are questioning Kelly’s commitment to Bank of New York Mellon, since a lack of pay restrictions might have catapulted him to Charlotte. BNY Mellon spokesperson Rob Gruendl commented that “Bank of America pursued Bob Kelly and they never really got close.” However, this should not ease the concerns of investors. Bove rhetorically asks “Is he here for the duration or will he jump if some other institution, not as influenced by the government, meets his price?”

I have placed Kelley on the CEO Watch List but remain skeptical his position at Bank of NY Mellon is truly at risk.

BofA's Long Nightmare Maybe Over - Insider Moynihan Gets the Crown

While I have been in the camp pushing for an outside candidate to replace Ken Lewis as Bank of America’s CEO, the board finally has made a decision and went with inside candidate Brian Moynihan. Moynihan, who is currently the president of the bank’s consumer and small business banking, is very familiar with all the working parts of the bank and his ascension should make for a relatively smooth transition, a positive for the selection. Paul Davis of the American Banker wrote,

Moynihan has maintained a relatively high profile at B of A since joining the $2.39 trillion-asset Charlotte company in 2004 when it bought FleetBoston Financial Corp., where he was a top lieutenant to chairman and CEO Charles Gifford. Many observers said he appeared to be a frontrunner because Gifford and Thomas May, a former Fleet director, were on the committee charged with finding Lewis’ successor.

According to a piece in the Wall Street Journal’s Deal Journal a Citi analyst said,

He is also generally well liked by the investment community, and from our conversations with current and former BAC employees, he is consistently viewed by his peers as a very intelligent and strategic thinker.

Paul Davis wrote a story in today’s American Banker in which he quoted Anthony Polini an analyst for Raymond James Associates. Polini said,

… Choosing Moynihan appears to endorse the business model built over decades by Lewis and predecessor Hugh McColl Jr., including coast-to-coast retail banking and market leading positions in mortgage, credit cards, brokerage and investment banking. Moynihan was picked to run the investment bank in January following the ouster of former Merrill Lynch & Co. CEO John Thain.

“The selection says that while the economy and recession have been lousy, the board still believes that the company model is intact,” Polini said. “It is a vote of confidence for the strategy.”

Moynihan has his work cut out for him. While the bank has managed to recently pay back the government for the TARP related money many difficulties remain. While the government will have to go along with the new choice, it is hard to imagine it was delighted with the board’s choice for an inside candidate. The new selection comes on the heel of the announcement that the vice chairman of Bank of America Merrill Lynch, William J. McDonough would resign.Stay tuned as it all plays out. There are likely to be more changes on the board and within the executive ranks.

Recommended Reading - BofA Could Take Cue From Ford, IBM, thestreet.com

Dan Freed wrote a spot on piece for the thestreet.com on how Bank of America might consider replacing Ken Lewis as CEO. Freed thinks, and so do I, hiring a CEO from outside the bank and possibly outside the banking industry is good idea.

Bank of America’s board might do well to look outside the banking sector for a CEO to replace Ken Lewis, who will leave the post at the end of the year.

Certainly the strategy has worked for Ford Motor Co. which is in the midst of an impressive turnaround without having to rely on government aid as GM and Chrysler have had to do. The architect, of course, is Alan Mulally, who joined Ford as President and CEO in 2006 after a long career at Boeing Co.

Perhaps the best example of an outsider fixing a troubled company is Lou Gerstner, who had no experience in the tech industry when he took the top job at IBM (IBM Quote) in 1993. Gerstner, a veteran of RJR Nabisco and American Express (AXP Quote) is widely credited with saving the company, which was under threat from the rise of the personal computer.

Bank of America needs to find the right candidate rather than settle for someone willing to take on the challenge. Despite rumors of continuing difficulty in finding candidates from the outside, the board needs to redouble its efforts and make sure it diligently pursues a variety of potential candidates. We will just have to wait and see.

Recommended Reading - Bank of America Bumps Into Hurdles in CEO Hunt, Wall Street Journal

The never ending saga of Bank of America and the search for Ken Lewis’ replacement continues. According to a story by Dan Fitzgerald and Joann S. Lublin for the Wall Street Journal,

Bank of America Corp.’s search for a new CEO has slowed as directors sift through outside candidates that are in short supply, according to people familiar with the process.

Check out the entire story.

For more:

NY Post

Dealbreaker

Dealscape

Bloomberg

Charlotte Observer

Recommended Reading- Update Bank of America's CEO search, Fierce Finance

Jim Kim of Fierce Finance provided a brief update on Bank of America’s search for a CEO to replace outgoing CEO Ken Lewis. Kim examines the latest news that Robert Diamond, Barclay’s CEO, took his name out of the running. He also reviewed the two internal candidates supposedly under consideration, Brian Moynihan and Greg Curl, two candidates I have already written about earlier and who I think should not be selected. Apparently according to Kim the buy-side community favors the appointment of an outside candidate. The article also provides a link to a video of CNBC commentator Charlie Gasparino discussing BofA’s search.

Recommended Reading - Who can fill the CEO seat?, Boston Globe

Todd Wallack, a reporter for The Boston Globe, wrote a terrific piece that appeared this morning on the search for a new CEO for Bank of America to replace Ken Lewis upon his retirement. Wallack examines the pressure to look for a candidate from outside the bank. He also mentions a long list of potential candidates from within the bank and outside. While much of this is a repeat of what has already been discussed their are some real nuggets of information in the piece. If you are interested in BofA, the story is a must read.

Recommended Reading - Bank of America's top pick for a new CEO? The one who created this mess, BloggingStocks

Zac Bissonnette, a frequent contributor to BloggingStocks.com, wrote a spot on piece on the possibility (mentioned by the WSJ and Atlanta Business Chronicle) that Bank of America may select Gregory Curl, the bank’s chief risk officer, as an interim CEO. The interim CEO would serve until a permanent replacement is found for Ken Lewis upon his retirement. What is the bank (the board) thinking? This is the kind of trial balloon that should never happen. Curl was the chief risk officer at the time of the ill-fated Merrill acquisition. Stay tuned.

For more:

ClusterStock

CEO Watch Ken Lewis, Bank of America, Update #8

It's official, Ken Lewis, Bank of America's embattled CEO announced his planned resignation for the end of the year. Lewis in a letter to Bank of America employees explained his reasons for resigning. The letter included in the WSJ's Deal Journal stated that Lewis' decision to resign was his alone and that he was not pressured to do so. Whatever the reason, his planned exit is the end of a sad chapter at the bank and hopefully the beginning of a new era for the bank, an unlilkely scenario at this point.

CEO Watch List - Ken Lewis, Bank of America Update #7

Ken Lewis’ CEO chair at Bank of America continues to get hotter and hotter. It is getting more and more difficult to see how Lewis can manage to keep his position much longer. Joe Bel wrote a piece for MarketWatch Tuesday in which he stated,

The multiple probes bearing down on Bank of America Corp. could make it difficult for Chief Executive Ken Lewis to keep his job.

Numerous analysts and management experts are now predicting the when rather than the whether. Stay tuned.

Is BofA's Lewis Getting to the end Game?

Ken Lewis, Bank of America’s embattled CEO, continues to oversee more executive management changes. Over the last few days a number of major management changes have been announced. In response to the growing number of top management changes speculation continues to grow that a potential successor is being developed for Lewis’ job. According to a story by David Mildenberg for Bloomberg,

Bank of America Corp., under pressure to overhaul management and reduce risk, set up a five-person competition to replace Kenneth Lewis as chief executive officer.

The bank yesterday shuffled senior management… Liam McGee, who headed consumer banking, left and was replaced by Brian Moynihan in a division that has provided most of the Charlotte, North Carolina-based bank’s revenue and profit.

Moynihan, 49, who ran wealth management and corporate and investment banking, is the top CEO candidate, according to analysts including Richard Bove of Rochdale Securities. Possible successors include ex-Citigroup Inc. executive Sallie Krawcheck, hired yesterday to head wealth management, home-lending chief Barbara Desoer and Chief Financial Officer Joe Price. Also in the running is Tom Montag, a Goldman Sachs Group Inc. veteran.

The speculation on who may take Lewis’ place is just that — speculation -- but it is very likely he is getting close to the end. Keep a close eye on the top players and what next steps take place.

For more:

Financial Planning

Boston.com

CNNMoney.com

Time.com

Recommended reading - Who could replace BofA's Ken Lewis?, Deal.com Dealscape

Dealscape today ran a piece about an IDD story on what Bank of America might do should Ken Lewis get the ax. The crus of the matter is the bak would turn to its Board of new members for Lewis’s replacement. According to the story,

IDD Magazine is reporting that BofA has a “Plan B” if the board decides to ditch CEO Kenneth Lewis. That Plan B, unsurprisingly, is to replace Lewis with one of the bank’s new board members, all of whom have banking experience.

Even a cat only has nine lives, we will just have to wait and see.

Recommended Reading - Can BofA CEO Ken Lewis Keep His Job? Business Week

Dean Foust of Businessweek wrote a story abut the continuing pressure on Ken Lewis, the CEO of Bank of America. For more than a year Liberum has placed Ken Lewis on our CEO Watch. Foust’s piece is a good analysis of where Lewis stands and what might hapen going forward. Check it out.

CEO Watch - Ken Lewis, Bank of America, Update #6

Ken Lewis lost his battle today to continue as both CEO and chairman of Bank of America. Shareholders voted to rest the chairmanship away from Lewis. Lewis has been under a cloud ever since the Bank of America acquisition of Merrill Lynch and in some people's minds since the bank's acquisition of Countrywide the mortgage company. The real question many people are asking is whether or not Lewis will continue as the bank's CEO much longer. According to a story by Louise Story for The New York Times,

... the vote to separate the chairmanship from the company’s executive leadership raised questions about how much longer Mr. Lewis could steer the bank as shareholder anger mounts over his handling of the bank’s takeover of Merrill Lynch.

Mr. Lewis has worked at the bank and its predecessors for 40 years and run it as chief executive since 2001.

It is very unlikely this is the end of the story. The bank replaced Lewis as Chairman with Walter E. Massey, a longtime board member and former president of Morehouse College.

For more:

SEIU blog
Economic Times
Wall Street Journal
Huffington Post
Financial Times
Los Angeles Times

CEO Watch - Ken Lewis, Bank of America, Update #4

The ratchet continues to turn a notch on Bank of America CEO, Ken Lewis. According to an analysis by Elinor Comley of Reuters,

The government may now add to the pressure from shareholders, analysts said. The sudden departure of Wagoner after nine years in the top job at GM signals the Obama administration is looking for management changes at bailed-out companies.

“His longevity in the job is probably very much in question,” said Keith Wirtz, chief investment officer of Fifth Third Asset Management and a former CIO at a Bank of America subsidiary. Fifth Third holds shares in the bank.

The bank disagreed with the assessment. “We do not see the parallel with the U.S. auto industry,” said a Bank of America spokesman, noting that since 1991 the bank has been profitable in every quarter except one, and made a $4 billion profit in 2008.

Still, shareholders say Lewis is in a precarious situation, citing both the government bailout as well as the fourth-quarter losses at Merrill, which suggest Bank of America did not perform adequate due diligence.

Lewis’ time as CEO of Bank of America may finally be coming to an end. As the pressure continues to grow, Lewis and the board will find it more and more difficult to justify his position as CEO. Keep a close eye on B of A.

For more:

The Plum Line

The Washington Post

CEO Watch - Ken Lewis, Bank of America, Update #3

Henry Blodget wrote a piece for Clusterstock today that questions (as I have been doing for quite some time) why Ken Lewis continues to remain as the CEO of Bank of America. Blodget stated,

Ken Lewis may be an excellent banker. He may be the pillar of his community. He may be a kind, considerate, and fair boss who is admired by his troops. He may, generally, be a real asset to his company.

But Ken Lewis just screwed up. Massively.

Ken Lewis screwed up so massively that he single-handedly demolished at least half of the value his shareholders’ spent decades accumulating–through a knee-jerk decision to buy the sinking super-tanker known as Merrill Lynch. Six months ago, in one tense weekend, Ken Lewis let himself get duped into thinking that if he didn’t bid now and bid high for an imploding Merrill Lynch, he’d lose the prize he’d had his eyes on for years.

Lewis continues to have the “confidence” of his board which seems to defy reality. He continues to try and redeem himself in the eyes of the public. Today, before meeting with President Obama, he was quoted by Bloomberg making what appears to be a valuable suggestion. Lewis stated,

… the U.S. should consider separating commercial lenders from investment banking activities.

While he is probably correct his suggestion is not enough to give him a pass on the damaged he overseen to BofA. Stay tuned.

Recommended Reading - Boards Refuse to Act Despite Poor Governance, Time.com

Douglas A. McIntyre wrote a piece for Time that attributed many of the recent problems top companies have been facing as a failure of the respective companies’ board of directors. McIntyre is very close to the truth. Boards have for too long just gone along and followed the lead of top management. It is now time for them to accept their real responsibilities to help guide management to make sensible corporate strategy and important business decisions. According to McIntyre,

… Each of these four companies ( referring to Bank of America, Citigroup, General Motors and Ford) has directors who chose not to ask hard questions and demand answers. How does a bank that was making $1 billion a year suddenly make $10 billion? How does a car company that nearly went out of business when oil prices rose sharply over three decades ago decide to reduce spending for the development of fuel-efficient vehicles?

Boards have some understandable reluctance to cross some lines if they may not have a tangible effect on company results. The Apple (AAPL) board clearly decided that Steve Jobs had some right to his privacy about his health. That may have been bad for investors. No one may ever know.

Several of America’s most famous companies have fallen on very hard times recently and investors might want to ask whey their boards appear to have done nothing demonstrable to help shareholders.

The short piece is worth a quick read.  Let’s hope boards get a chance to read the piece as well. 

Bloomberg's Reilly Calls for Ken Lewis' Head

David Reilly a news columnist for Bloomberg earlier today suggested that Bank of America’s chairman and CEO Kenneth Lewis should be forced out or at a minimum should give up one of his positions.  According to Reilly,

Kenneth Lewis gambled big. He lost. Now taxpayers have to pick up his tab.    

For that, the Bank of America Corp. chief executive officer probably needs to go. At the very least, Lewis, who also is chairman, should give up one of his posts to bring greater accountability to the bank. 

Reilly is not particularly focused on BofA’s acquisition of Merrill and the subsequent difficulties that have resulted as the main reason for his call but rather Lewis’ series of ill-fated acquisitions (Countrywide etc.) and business steps that have all come together to force the bank to go to the government for money to complete the Merrill transaction.  Reilly went on to say,

Now the Charlotte, North Carolina-based company is staring into the abyss. The bank’s stock fell about 18 percent yesterday following reports that it told the government in December that it wouldn’t be able to close the Merrill deal without assistance because of bigger-than-expected losses at the brokerage.    

The government may now have to inject more capital into the company or backstop losses on a portion of its assets, or some combination of the two. The government has given Citigroup Inc. a similar guarantee against losses on some assets, although that hasn’t kept investors from fleeing its stock. 

I suspect Lewis will remain CEO and may be forced to give up the chairmanship but we will just have to see how this all plays out.  

For more:

UK Telegraph

Portfolio.com  

New York Times

Clusterstock

Dealscape 

Suggested Reading - B of A CEO Lewis The Next to Fall?

More and more financial CEOs and CFOs of battered financial firms find themselves the topic of rumors or conjecture. Just today, George Bowser, Jr. wrote a piece for Seekingalpha.com in which he speculated that Kenneth Lewis the CEO of Bank of America BAC (NYSE) might be the next top financial executive to get his walking papers. Bowser bases his speculation on the Lewis' decision to buy and go through with the acquistion of troubled mortgage lender Countrywide Financial CFC. Bowser based his speculation on the recent fall of Kenneth Thompson the CEO of Wachovia who was forced out after his expensive acquisition of mortgage lender, Golden Financial. In his piece Bowser stated,

I believe that if BofA does proceed with the Countrywide merger, Ken’s future at the bank may come to a swift end. BofA will continue to report quarterly losses, just as others in the financial sector. The stock price will suffer and they may have to cut jobs and the dividend rate to conserve capital.

While the Lewis' Countrywide acquisiton may create financial difficulties for Bank of America, I am not convinced Lewis' position is at serious risk. Stay tuned and make sure you keep a close eye on key decisions Lewis and BofA mnakes over the next few months.