Moynihan Says He’d Like Being BofA Chief Rest of His LifeHugh Son
Brian T. Moynihan, who endured record losses and public thrashings while cleaning up Bank of America Corp.’s mortgage mess, said he wouldn’t mind being chief executive officer of the lender forever.
“It’s the best job there is,” Moynihan said yesterday in an interview scheduled for PBS television’s “Charlie Rose” program. “While there have been times when you sit there and say, ‘Jeez, this is a lot of pounding,’ you always keep your eye on the purpose you’re here. And that’s to help people with their financial lives -- if you really keep focused on that, I could do this the rest of my life.”
Moynihan, 53, has booked more than $40 billion in expenses tied to the 2008 takeover of mortgage lender Countrywide Financial Corp. since he become CEO in 2010. His plan to shrink Bank of America, the second-biggest U.S. lender, through more than $60 billion in asset sales is mostly done, he said in the hour-long interview. Now he’s set to add staff in commercial lending, investment banking and mortgages, Moynihan said.
A succession plan is in place at the Charlotte, North Carolina-based bank should the need arise, Moynihan said. In late 2009, he prevailed in a search to replace Kenneth D. Lewis that took more than 10 weeks after Lewis’s unexpected retirement and exposed the firm’s lack of preparation.
Moynihan pointed to mistakes made by his predecessor that made the bank grow too quickly. The acquisition of Countrywide has been blamed by lawmakers for helping fuel the housing bubble by creating billions of dollars’ worth of defective loans that borrowers couldn’t afford.
“We also had a legacy Bank of America credit-card business that we had grown way too fast,” he said. “We were buying back shares and paying dividends and making acquisitions.”
Weighed down by mortgage and credit-card costs, Bank of America earned $3.1 billion in 2012 before taxes and posted pretax losses of $230 million the previous year and $1.3 billion in 2010. In March 2011, Moynihan said his company could earn $35 billion to $40 billion annually before taxes when businesses and the U.S. economy recovered.
The banking industry must be managed to give up some profit during boom times so that “we’re not going to give it all back in tough times,” he said.
Moynihan boosted capital levels under coming international rules to a record 9.25 percent at the end of last year, helping pave the way for regulatory approval this month of a $5 billion stock repurchase program. Bank of America has about 10.8 billion shares outstanding, many of them created when the firm sold $19.3 billion of stock to repay U.S. bailouts in 2009.
“You can’t dilute your shareholders when your price is down,” Moynihan said, referring to the process of selling additional shares. “The cost of plugging the holes in the balance sheet was about 4 billion to 5 billion shares that we didn’t think we’d have out.”
The lender’s stock more than doubled last year, the first annual gain during Moynihan’s tenure and the best performance on the KBW Bank Index of 24 companies. The company climbed 5.8 percent this year through yesterday. At $12.28, the shares are still below the $15.06 at which they traded the day before Moynihan took over in January 2010.
The CEO will use his firm’s earnings to help repurchase shares as long as they are trading for less than book value, he said. As litigation costs and other expenses subside, the company’s earnings power will be evident, he said.
“That’s what the markets are starting to see,” Moynihan said. “As the issues fade, you can start to see the core earnings come through.”
Bank of America’s board gave Moynihan the job after at least two external candidates dropped out, and after sorting through about half a dozen internal candidates. When the appointment was announced in December 2009, Lewis said he hoped Moynihan would have the CEO post “much longer than the last three or four” jobs Moynihan held at the bank, and that he didn’t have a huge ego.
“Another unique characteristic about him is that he wanted the job,” Lewis said.