Brian Moynihan, Chief Executive Officer at Bank of America (NYSE: BAC) has his work cut out for him. Although he’s been battling fires valiantly since taking over the reigns of the firm struggling to rebound from the financial crisis, there is no end in sight.
Troubled by loan losses and a litigation assault on the firm since Ken Lewis left office last January 1, Moynihan is challenged with restoring investor confidence in his firm, while simultaneously improving customer relations. The latter may be a problem, due to new regulations. The banking sector has strict rules they must adhere to now on fees, which has sapped some of BofA’s, profitability. As a result, they’re finding new ways to generate fees, much to the chagrin of their customers.
He paid $2.8 billion last week to government-owned companies Fannie Mae and Freddie Mac to settle claims the bank sold them defective mortgages, a major step toward resolving liabilities taken on with the 2008 purchase of Countrywide Financial Corp. Stephen A. Schwarzman, CEO of Blackstone Group LP, the world’s biggest buyout firm, commented “Brian’s got his hands totally full dealing with the internal issues and the external focus on some of the problems of the company. He is in firefighter mode, dealing with fires that will be contained but need attention.”
A year ago, Moynihan pledged to improve customer service and assigned more than 26,000 employees to help delinquent homeowners. By last month, at least two states sued, claiming the bank foreclosed on people enrolled in loan-modification programs. Moynihan publicly supported the Obama administration’s push to protect consumers, only to see new regulations blow an estimated $4 billion hole in annual revenue. During a December 7 conference, Moynihan told he investors the dividend may be restored in 2011, a similar claim competitors Citigroup (NYSE:C) and JPMorgan Chase (NYSE: JPM) have made recently.
Although Moynihan inherited a mess at BofA, his window is short for a turnaround. With his competition showing strong signs of improvement, the pass they received in 2010 could quickly be rescinded.
