As he turned 65, Bank of America Corp.’s Brian Moynihan took the stage at a town hall meeting and sent a jolt through the crowd, saying he wants to still be CEO when the stock eclipses $100.
The comment, delivered with a wry smile, turned heads not only because the share price is currently $45. It underscores how long the man on track to become the industry’s senior statesman plans to savor his status.
Among the four giants of U.S. commercial and consumer banking, Bank of America stands out — as status quo. It’s the only one that’s not undergoing a sweeping overhaul or publicly inching toward a change at the top.
Moynihan, who confounded critics by righting the lender after the 2008 financial crisis, is poised to notch his 15th year as CEO and is digging in — with no heir apparent and no sign of deviating from his no-frills “responsible growth” strategy.
For shareholders, it’s an approach that has made Bank of America the 11th-best performer among the 24 major U.S. lenders in the KBW Bank Index over the past half-decade. Analysts expect that by this time next year, the stock may crest $49.
The firm has avoided the regulatory blowups that forced peers such as Wells Fargo & Co. and Citigroup Inc. to focus on costly overhauls.
But it has also fallen behind its only larger rival, JPMorgan Chase & Co., on a range of fronts, including Wall Street market share and stock performance.
Warren Buffett, Bank of America’s top shareholder, trimmed his stake this year without comment, spurring a debate over its prospects.
“‘Responsible growth’ will be the key strategy for Bank of America — why change it?” said Morgan Stanley analyst Betsy Graseck. “It’s more of the same, but it’s working.”
The next question is whether President-elect Donald Trump’s incoming administration may shake up the financial landscape to Bank of America’s advantage.
In an interview with Bloomberg Television on Tuesday, Moynihan predicted an “economic atmosphere of deregulation” that could benefit the industry. That could mean, for example, tempering capital rules to encourage lending.
But for Bank of America, the years ahead could also include other US policy swings that knock more risk-prone competitors off balance.
“The ‘responsible growth’ mantra makes a difference,” said Wells Fargo analyst Mike Mayo. “Any bank is one day, one mistake away from ruining their record. Sometimes slow and steady does win the day.”
Installing Pipes
Back in his days at Brown University, Moynihan landed a summer job working for a utility, replacing gunky water mains in his home state of Ohio.
It’s a tale he imparts sparingly to close confidants, explaining how he arrived at his management philosophy. Success, he says, is often a matter of creating a system and just running it smoothly.
When Moynihan took over Bank of America, he inherited such a mess that few in the industry gave him strong odds of success.
His predecessor, Kenneth Lewis, made two infamous deals as the financial crisis unfolded — acquiring subprime-mortgage machine Countrywide Financial and agreeing to pay about $50 billion for Merrill Lynch at the brink of its collapse.
Buffett was galled, telling a government commission that if Lewis had waited just one more day, he could have scooped it up for nothing. (The takeover closed for $18.5 billion.)
By late 2009, Bank of America’s board was on an intense hunt for a new CEO. It needed someone who could steer the firm over a tidal wave of government probes and legal claims. By Wall Street standards, the pay would be meager, given that the bank was being propped up by taxpayers.
As outside contenders demurred, the board landed on Moynihan — a lawyer by training who in the chaos of the financial crisis had just cycled through a series of senior posts at the firm with little time to make his mark.
‘A Lot of Hits’
During his first two years in charge, the stock cratered, falling below $5 as shareholders worried about whether anyone could navigate its massive liabilities.
Moynihan pulled it off. He struck a $5 billion deal with Buffett to get fresh capital and the investor’s full-throated backing.
The CEO paced legal and regulatory settlements, giving the bank time to earn its way out of the hole. He also whittled costs and the workforce, restoring profitability.
The naysayers never swayed him, said Gary Lynch, the bank’s former general counsel.
“Brian was a rugby player,” Lynch said. “He took a lot of hits, which would have taken a lot of people out. But he kept going.”
Buffett’s stake in the bank swelled to more than 13% by this year.
Tempering Risks
Much of Bank of America’s Wall Street workforce mistakenly assumed that as soon as it was back on its feet, risk-taking would ramp up again.
Not so. The responsible growth mantra Moynihan started invoking around 2015 at virtually every public appearance proved to be serious.
