March 3, 2021

Waiting for a New Blueprint From Bank of America

Will he break up the company and spin off Merrill Lynch? Cut tens of thousands of jobs? Put its subprime mortgage albatross, Countrywide, into bankruptcy? If not such a bold move, how does Mr. Moynihan plan to reverse the company’s painful slide?

The earliest clues could come Thursday, when the top executives of the country’s largest bank gather at its Charlotte, N.C., headquarters to review recommendations of a 44-member internal team that has been preparing restructuring plans since March.

Company officials say a split-up is out of the question for now, as is imminent bankruptcy for Countrywide. But 30,000 jobs, roughly 10 percent of the company’s work force, could be eliminated over the next three years as a result of the restructuring initiative known as Project New BAC.

 There has been plenty of drama already this week, with the abrupt exit Tuesday of two top executives, Sallie Krawcheck and Joe Price, and the splitting of the bank into two basic units, one dealing with individual customers, the other focusing on businesses and institutions.

While company officials say the reorganization would actually make it harder to break up the company, it has not stilled the speculation.

“At some point, it gets too big to manage,” said Brian Wenzinger, a principal at Aronson Johnson Ortiz, a Philadelphia money management firm. “Smaller works better, and the less complicated it is, the better it can work.”

Bank of America shares rallied sharply Wednesday on a broader market jump, rising 7 percent to close at $7.48. They are still off 50 percent since January, weighed down largely by fears that the company could have to pay out tens of billions of dollars more to settle claims stemming from the subprime mortgage meltdown.

Those losses set off worries the company might need to raise fresh capital, but the $8.3 billion sale of its stake in China Construction Bank and a $5 billion investment by Warren Buffett last month have eased those fears for now.

Despite the cold water from executives, some big investors would like to see the Merrill brokerage and investment banking unit spun off.

“As a stockholder in Bank of America, I feel like Merrill Lynch would be worth $7 a share on its own, at least,” said Buzzy Geduld, who sold his brokerage firm — Herzog, Heine, Geduld — to Merrill in 2000, and now owns more than 2.5 million shares in Bank of America. “I think the upside is terrific.”

No one disputes the idea that Bank of America has become too complex. In some ways, the company resembles a crazy quilt assembled through acquisitions pursued by Mr. Moynihan’s predecessor, Kenneth D. Lewis, whose deal-making culminated in 2008 with the purchase of both Merrill Lynch and Countrywide Financial, the subprime mortgage giant at the root of many of Bank of America’s problems today.

Mr. Moynihan has spent much of his 18 months at the helm undoing Mr. Lewis’s legacy. In fact, company officials say the need to turn what was a sprawling empire into a leaner, more focused enterprise is what is driving both Project New BAC, which takes its name from the company’s ticker symbol, and Tuesday’s reshuffling.

“We’ve simplified the company in the aftermath of the financial crisis and regulatory reform,” said Anne M. Finucane, Bank of America’s top global strategy and marketing officer. “And we’re reducing risk to both the company and the financial system by evaluating businesses that are not core to the strategy or were bolted on.”

She added that the new structure follows the blueprint Mr. Moynihan presented to the board shortly before he was tapped to become chief executive in December 2009.

Looking ahead, executives say the reorganization actually makes it harder to split off Merrill Lynch, because it will be more integrated into the overall company and will not remain under one main leader. Its famous “thundering herd” of 16,000 financial advisers will be under David Darnell, who will also head up Bank of America’s more traditional consumer businesses. The institutional business will still be under Tom Montag, a Goldman Sachs veteran who joined Merrill shortly before Bank of America acquired it in 2008.

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