Bank of America Corp. (BAC) Chief Executive Officer Brian T. Moynihan, seeking to reverse a 28 percent stock slide this year, will take the “toughest questions” on a public call hosted by fund manager Bruce Berkowitz next week.
Berkowitz’s Fairholme Capital Management LLC, which held 92.6 million Bank of America shares as of March 31, will host a 90-minute conference call with Moynihan on Aug. 10, the Miami- based manager said yesterday in a statement. The event aims to help investors understand why the Charlotte, North Carolina- based lender is a core holding for Fairholme, Berkowitz said.
The dive in Bank of America’s stock has helped to sink the returns of investors including Berkowitz, who was named U.S. domestic stock-fund manager of the decade last year by Morningstar Inc., and hedge-fund manager John Paulson. It’s more common for executives to speak at conferences with research analysts than a big shareholder, said Jonathan Hatcher, a Jefferies Group Inc. credit strategist specializing in banks.
“It’s unique -- I can’t recollect the last time the CEO of a large firm agreed to something like this,” Hatcher said in an interview. “The market always appreciates executives being more open with the investment community, but I suspect it will be a repeat of what was discussed on the last earnings call.”
Berkowitz, 53, is seeking to reassure investors after his flagship Fairholme Fund (FAIRX) declined 15 percent this year through yesterday, trailing the Standard & Poor’s 500 Index gain of less than 1 percent. In a report to investors this week, he said his strategy was to “embrace the hated” among stocks. Financial firms that have significant cash flows and narrowing restructuring costs are at a “tipping point,” he said.
The call will be open to the public, said Hedda Nadler, a spokeswoman for Fairholme.
Bank of America, the biggest U.S. lender by assets, fell 30 cents at 10:26 a.m. in New York Stock Exchange composite trading to $9.24, the lowest since May 2009. Moynihan, 51, has reached settlements with buyers and insurers of defective mortgages, booking about $30 billion in accords and writedowns since taking over last year.
Fairholme began acquiring its stake in Bank of America during the first quarter of 2010 and bought the majority in the last nine months of last year, according to company filings. Bank of America’s average stock price during 2010 was $14.69. The highest closing price that year was $19.48 and the lowest was $10.95.
“I suppose desperate times call for desperate measures,” said Manal Mehta, a partner at Branch Hill Capital, a San Francisco-based hedge fund that has short positions on Bank of America stock. “While a push for greater transparency is always welcome, it isn’t clear that Moynihan can give investors comfort that Bank of America has command over its mortgage liabilities.”
The CEO “appreciates the opportunity to discuss the company’s strategy and performance with investors and to take their questions, and he does so regularly in a variety of venues,” said Larry DiRita, a Bank of America spokesman.
Bank of America will generate enough earnings to comply with new capital standards, end liabilities from the 2008 takeover of Countrywide Financial Corp., and return funds to investors, Berkowitz said yesterday. The lender has the “management in place” to reach these goals, he said.
“Skeptics are invited to participate on the call,” Berkowitz said in the statement, adding that the comments in the release were solely his opinions. Moynihan will make opening remarks, then Berkowitz will ask him the “toughest questions” submitted by e-mail to firstname.lastname@example.org, he said.
The fund manager “is probably trying to put pressure on Bank of America to clarify its strategy going forward in addressing the legacy issues they still face,” said Jonathan Finger, whose family-owned investment company, Finger Interests Ltd., owns 1.1 million Bank of America shares. “If you listen to the conference calls, it’s difficult to understand from Moynihan’s responses what the company’s strategy is.”
Berkowitz previously hosted a conference call with the head of a company that he considered undervalued. In March 2009, he peppered then-Pfizer Inc. (PFE) CEO Jeffrey Kindler with questions about the prospects for the firm, his biggest holding at the time.
In the three months that ended Nov. 30, 2009, Fairholme reduced its Pfizer stake to 17.3 million shares from 76.5 million, according to a semi-annual report filed with the U.S. Securities and Exchange Commission on Jan. 28, 2010. Pfizer stock had climbed 56 percent between early March and the end of November of that year.
To contact the reporter on this story: Hugh Son in New York at email@example.com