After a month’s extensive search, Bank of America Corporation (BAC), the largest bank in the nation, said on late Wednesday that its consumer banking head Brian Moynihan will succeed retiring Ken Lewis as CEO effective Jan 1, 2010.
The complications following the takeover of Merrill Lynch & Co. pushed the prior CEO of BofA into early retirement and the negotiations for a new CEO became difficult as there were pay restrictions imposed by government pay czar Kenneth Feinberg before the company repaid $45 billion of federal bailout money.
The new CEO, Moynihan, 50, was previously head of Global Wealth and Investment Management at FleetBoston Financial, which was acquired by BofA in 2004. Moynihan worked for FleetBoston for 11 years.
We think the new CEO will be under tremendous pressure to address defaults on consumer loans as a result of the recession, which have resulted in two quarterly losses in the past four quarters.
BofA’s appointment of Moynihan comes shortly after an external candidate, Robert Kelly, decided not to take the position and to remain at Bank of New York Mellon (BK) as CEO.
BofA’s third quarter loss came in at 26 cents per share, substantially worse than the Zacks Consensus estimated loss of 10 cents. This compares unfavorably with earnings of 15 cents per share in the prior-year quarter.
Though earnings benefited from the profit generated by its wealth management business, the company experienced continued net interest yield compression and credit quality deterioration. Additionally, the company is facing problems over litigation issues related to the Merrill Lynch acquisition. We think the new CEO should focus on the integration of Merrill Lynch and smooth relations with regulators.
We also anticipate continued synergies from the company’s large scale operation and balance sheet restructuring.
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