Bank of America (NYSE:BAC) recently hired a new corporate and investment banking chief—Thomas Montag and he’s already facing a major test: steadying Bank of America’s tumultuous and turmoil-ridden operations overseas which were acquired in Bank of America’s acquisition with Merrill Lynch.
Many of the top bankers in Merrill Lynch’s overseas operations have moved on to other positions, which was a major setback in Bank of America’s hopes in expanding outside the United States. Brian Moynhan, who was the corporate and investment banking chief before Montag came on board, many top bankers thought that Bank of America did not share the same concerns that they did—such as the aggressive pursuance of every last deal and competitive compensation for bankers that performed extraordinarily well.
Thomas Montag is quickly moving to repair the damage done by his predecessor. In a recent phone address to his managing directors a few weeks ago, Montag stated that he expects 50% of Bank of America’s major corporate loans to be to companies abroad in the coming years. Currently, only 15% of Bank of America’s corporate loans are to overseas companies. Montag’s next step in transforming Bank of America is to name a management team which will transition Bank of America into a global bank.
Bank of America agreed to buy Merrill Lynch at the bottom of the recession when Merril Lynch had major financial trouble and nearly collapsed. Bank of America used the financial crisis as an opportunity pick-up Merrill and gained a base to transform the company into a multi-national lending institution. Before the buyout of Merrill Lynch, only 10% of Bank of America’s revenue came from outside the United States, where as 33% of Merrill Lynch’s income came from abroad.
Before the economic downturn, Bank of America crossed a federal limit on the maximum amount of deposits a bank can hold, so BofA must now focus on overseas business for continued growth. If Montag succeeds, he will provide a much needed boost to a bank that will have a very difficult time growing its US business.
