Bank of America’s management shake-up this week may not provide a boost to earnings and did little to clarify the succession plan for CEO Brian Moynihan, analysts said Thursday.
Late Wednesday, Moynihan announced the unexpected replacement of Chief Financial Officer Bruce Thompson at a time when the company is still struggling to increase revenue. The Charlotte-based bank is also working to resubmit a capital plan that will pass muster with the Federal Reserve after the regulator found deficiencies this spring.
In addition to replacing Thompson, Moynihan elevated a former FleetBoston Financial colleague, Terry Laughlin, to head the wealth management unit and enhanced titles for other executives, including some in Charlotte. Bank of America acquired Fleet in 2004.
Analysts, however, questioned the motives behind the moves and whether they would be effective at a company that has lagged the performance of rivals such as Wells Fargo, Citigroup and JPMorgan Chase.
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“Many management changes show lack of stability at the top, and some of these changes also seem to result in overlapping responsibilities, which can reduce accountability rather than enhance it,” CLSA analyst Mike Mayo wrote in a note to clients.
Thompson’s exit also put a focus on who might be in line to one day succeed Moynihan, who is 55 and became CEO in 2010. Moynihan has given no indication publicly that he’s interested in leaving anytime soon, and the bank’s board made him chairman in October.
Independent bank analyst Nancy Bush said Thompson was not the most likely candidate to succeed Moynihan, “and there is not one now.”
Others say Chief Operating Officer Tom Montag is the most obvious choice. But Ken Thomas, a Miami-based independent bank consultant, speculated that the bank might go with an outside candidate next time. Moynihan was an insider, having joined the bank in the Fleet deal.
“Looking over (Moynihan’s) performance, they might decide to try the other approach this time,” Thomas said.
Bank of America spokesman Larry Di Rita declined to comment Thursday on the the bank’s succession planning, which is overseen by its board, but he said the bank is “fortunate to have breadth and depth of strong leaders.”
Thompson’s sudden departure has also raised questions about whether his working relationship with Moynihan had deteriorated. The news of Thompson’s exit came exactly a week after the bank reported a better-than expected $5.3 billion second-quarter profit, its best performance since 2011. But analysts pointed out those results were helped by much lower legal costs and “one-time” gains.
On Thursday, Cathy Bessant, the bank’s Charlotte-based head of technology and operations, said she was not aware of any falling out between Thompson and Moynihan. Bessant, who works on the same floor of the bank’s Charlotte headquarters as the pair, said the two “have a very strong relationship.”
“I think any portrayal of a schism is completely inaccurate,” she told the Observer.
Bessant pointed out that Thompson has served more than five years as chief risk officer and then CFO of the second-largest U.S. bank by assets.
“I can’t think of a tougher job than to be the CFO of a major bank,” she said. “So, to hear him say he might want to think about things differently, that did not surprise me.”
For Charlotte, Wednesday’s moves mean the loss of a top executive. Thompson’s replacement, Paul Donofrio, who was already an executive for the bank, is based in New York.
But the shuffle also elevated two executives who were already based in the city. Andrea Smith, who had been global human resources executive, is now chief administrative officer, a newly created role. Bessant kept the same role but had her title bumped to chief operations and technology officer.
Wednesday’s changes mean two of five executives with “chief” in their titles will be based in Charlotte. Before, only one of five such executives – Thompson – was stationed in the city.
The shuffling follows an investor backlash this spring after the bank’s board named Moynihan the chairman, rolling back a separation of the roles approved by shareholders in 2009. It also comes after the bank hit its latest snag with regulators over its plans to return more capital to shareholders.
On Wednesday, Moynihan said Laughlin will continue to handle the resubmission of the bank’s capital plan by Sept. 30, but that Smith will ultimately take over the task.
The management changes, Mayo wrote, “may raise speculation about (Bank of America’s) progress with its new stress-test submission, though this is tough to gauge.”