Bank of America Corp.’s gaffe on U.S. stress tests has meant “tough consequences” for investors, Chief Executive Officer Brian T. Moynihan said today as his staff and directors regrouped to figure out what went wrong.
The board has started multiple reviews of how the mistake occurred and who’s responsible while a new submission to the Federal Reserve is prepared, officials told shareholders today at the annual meeting in Charlotte, North Carolina. Chief Financial Officer Bruce Thompson said revisions are due by May 27, and the regulator has 75 days to respond.
Moynihan, in his fifth year atop Bank of America, has been thwarted at least twice in attempts to boost the dividend from 1 cent, where it has languished since the financial crisis. The latest rough patch came last week when plans for an increase to 5 cents and more share buybacks were suspended because of a $4 billion error in capital calculations.
The mistake at the Charlotte-based bank was “disappointing” to everyone, Moynihan told the gathering. Thompson affirmed that the revised plan will mean a lower payout for stockholders of the second-largest U.S. lender. He didn’t specify the amount and said he couldn’t predict the Fed’s reaction.
All 15 directors standing for election and the independent accounting firm won approval during today’s vote, the company said in a statement, without giving the tally.
The bank is still wrestling with legal claims Moynihan inherited from his predecessor’s crisis-era takeovers of Countrywide Financial Corp. and Merrill Lynch & Co., and investors pressed for answers on when the last of the disputes will be resolved. Moynihan, 54, declined to give a timetable.
Bank of America had shown progress, improving profit last year to $11.4 billion, the highest since 2007. Investors had speculated the company would start to rebuild its quarterly dividend toward the 64 cents offered before the financial crisis.
Moynihan appeared to deliver in March when his bank won Federal Reserve approval to increase the quarterly payment to 5 cents and repurchase $4 billion in stock. Bank of America shares tumbled after the error was found, and the company has declined almost 5 percent in 2014. The stock climbed 34 percent last year.
Mike Mayo, an analyst at CLSA Ltd., peppered Moynihan with questions about the accounting lapse, high overhead costs and the low stock price, saying he had “a tough time not coming to the conclusion that Bank of America is too big and complex to manage.” Board Chairman Chad Holliday said he doesn’t share that view.
Investors aired grievances that included the missing dividend, concerns about corporate governance, environmental damage from coal mining and even which kinds of light bulbs and toilets the bank uses.
One attendee questioned whether the CEO deserved his pay in light of the setbacks, while supporters cited the lender’s help for struggling mortgage holders. At one point, the meeting devolved into a shouting match between two investors.
“You stand tall and proud,” one woman told Moynihan after another criticized his performance. “I love you, Mr. Moynihan.” The CEO joked that only the shareholder and his own mother felt that way.
He was also confronted by a 13-year-old girl who said her father lost his job at Bank of America after being told the firm could hire someone for less money in another nation. The company has been cutting costs and thousands of jobs to boost profitability.
“It’s one of the toughest things I have to do,” he said. The bank isn’t moving positions overseas and it’s actually repatriating jobs, he said.
The Rev. Jesse Jackson was also present to make the case that banks should send a greater share of work, including legal and advertising, to minority firms.
“We must be a part of the business relationship,” Jackson said after the meeting concluded. “We need to have a two-way trade with the private sector.”
The lender’s travails with the Fed didn’t change the opinion of Warren Buffett, according to comments the Berkshire Hathaway Inc. chairman made at his company’s annual meeting.
“That error they made does not bother me,” Buffett, 83, said May 3 in Omaha, Nebraska. “You do the best you can.”
Berkshire made a $5 billion investment in 2011 that includes preferred stock. A proposal that would gain the bank more favorable treatment from regulators on the stake won approval from shareholders at today’s meeting.
“Buffett’s right,” said Tony Plath, a finance professor at the University of North Carolina in Charlotte. “In a month, this will all blow over,” he said, calling the accounting blunder a matter of appearances rather than a real financial threat.
Moynihan, who has booked more than $50 billion to cover claims and disputes over home lending, faces at least one more multibillion-dollar settlement. U.S. prosecutors are seeking more than $13 billion to resolve federal and state probes into the sale of mortgage bonds, people with knowledge of the matter said last month. An accord could force the firm to post a quarterly loss, said Charles Peabody, a Portales Partners LLC analyst.
One sign that normalcy is returning to the bank included a dearth of protesters. Unlike previous years, when hundreds thronged the streets of Charlotte around the meeting, less than a dozen gathered today outside the convention center.