March 2, 2021

DealBook: Shake-Up at Bank of America

Facing mounting legal liabilities and a falling stock, Bank of America’s chief executive, Brian Moynihan, has shuffled his management team.

On Tuesday, the bank detailed a major reorganization, announcing the departure of two finance veterans — Sallie Krawcheck, the president of global wealth and investment management, and Joe Price, the president of consumer and small business banking.

As part of the changes, David Darnell and Tom Montag were named co-chief operating officers, reporting directly to Mr. Moynihan. Mr. Montag will oversee the banking and markets activities of the company, including Bank of America Merrill Lynch, which he headed previously. Mr. Darnell, now head of global commercial banking, will run all of the bank’s consumer businesses, including wealth management and home loans.

Bank of America shares have been pounded this year amid growing losses linked to the housing meltdown.

The financial firm got a brief boost of investor confidence last month when Berkshire Hathaway made a $5 billion investment in the financial firm.

But concerns over the company’s legal liability have continued to pile up, with federal regulators filing suit against Bank of America on Friday. The regulators alleged that the financial firm and 16 others misrepresented the quality of mortgages that they sold to Fannie Mae and Freddie Mac, the housing giants. The stock closed at $6.99 Tuesday, off roughly 50 percent since the start of the year.

The reorganization comes just days before executives are to review proposals for Project New BAC, an internal initiative aimed at making the company more nimble. As part of that effort, the company is expected to cut 10 percent of the overall work force, according to a person with knowledge of the matter.

The cost savings in eliminating the jobs of Ms. Krawcheck and Mr. Price are potentially substantial, said a senior executive close to Ms. Krawcheck. This person, who was not authorized to speak on the record, said the departure of Ms. Krawcheck was not acrimonious as it was with Citigroup. “She has been through this before and gets it,” the person said.

The shake-up also marks the second time this year that Mr. Moynihan has shuffled his management team. He named a new chief risk officer, Bruce Thompson, to replace Charles Noski, who left to tend to “a serious illness of a close family member.” Gary Lynch of Morgan Stanley was tapped to become the global chief of legal, compliance and regulatory relations, a newly created position.

Mr. Price’s departure closes the book on a long career at Bank of America, which he joined in 1992 from Price Waterhouse. He is no stranger to shakeups at the bank, having shifted roles on multiple occasions, moving from auditor general to risk manager. His most recent move came in early 2010, when Mr. Moynihan assigned him to oversee the consumer bank after a stint as chief financial officer.

A top executive at Sanford Bernstein and Citigroup, Ms. Krawcheck was hired in August 2009 by Kenneth D. Lewis, then the bank’s chairman and chief executive.

The wealth management group has posted steady results under her stewardship, even while the broader bank has been battered by billions of dollars in losses. In the second quarter of this year, the division earned $506 million, down slightly from the prior period but up from $329 million in the second quarter of 2010.

In particular, the Merrill Lynch brokerage force has been a surprising bright spot for the bank, as the unit has ramped up its client base since its 2009 takeover by Bank of America. In a report earlier this year, Michael Mayo, an analyst at Crédit Agricole Securities, said he expected the growth to continue.

Ms. Krawcheck has been a well-known figure on Wall Street for decades and among the small cadre of top women executives in finance. After college at the University of North Carolina at Chapel Hill, she moved to New York, landing a job as an investment banker at Salomon Brothers and switching after a few years to Donaldson, Lufkin Jenrette.

Later Ms. Krawcheck was hired at Sanford Bernstein, where she distinguished herself as a stock analyst, covering securities companies. At the time she made headlines with some of her bold calls, notably upsetting the well-known Wall Street executive Sanford Weill when she made negative comments on the acquisition of Salomon by his firm, the Travelers Group. She became Bernstein’s chairman and chief executive not long after Alliance Capital Management purchased the firm in 2000.

Amid scandals over Wall Street research, she became head of research and brokerage at Citigroup in 2002, a move to restore credibility in the division. She eventually rose through the ranks, becoming chief financial officer at Citigroup and then head of its wealth-management division. But she left the bank in September 2008 after clashing with top executives over whether to reimburse clients who lost money on Citigroup hedge funds.

Mr. Moynihan, in a statement, praised the efforts of Ms. Krawcheck and Mr. Price at Bank of America, saying “de-layering and simplifying at the scale in which we operate requires difficult decisions.”

“We wish them well and look forward to their continued leadership and business successes in the future,” the statement added.

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