Six months into one of the most scrutinized takeovers in recent memory, Bank of America Corp. is pulling every lever imaginable to make its embattled purchase of Merrill Lynch & Co. work.
Brian Moynihan, the B of A executive running the integration, last week outlined the steps taken to squeeze out profit from the troubled investment bank at a time when the parent company needs it most. A difficult task in itself, his job is complicated by unrelenting attention from the public, press and lawmakers over how the government-backed deal was handled and the $45 billion the company has received from the Troubled Asset Relief Program.
In a wide-ranging interview, Moynihan alternated between hints of the old B of A swagger and uneasiness over market volatility as he detailed how the company and its management team are handing external pressures.
"The problem now is that it's noisy and people are looking for issues because of the Tarp, the merger or the press," said Moynihan, who was named the president of global banking and global wealth and investment management after the January ouster of former Merrill chief executive John Thain.
"The public atmosphere has made everybody's job more difficult," he said. "We've gone through some tough times … , but people are focused on driving this company back to the preeminence that it deserves."
Encouraged by a relative return to stability in capital markets, Moynihan also concedes that the economy is still "not in good shape" and, thus, any hiccup makes traders and investment bankers hold their breath. He is keenly aware that B of A needs stable markets to keep reducing the risky exposures embedded in the investment bank.
"The last couple of days it slowed down, and everybody was like 'Whoa,' " he said in describing lingering anxieties over markets that have fought back to where they were just before last September's near meltdown. "We're not fully back to the salad days … , but at least it's going in the right direction. We just ask to keep the markets open enough to have sustained liquidity."
Getting Merrill turned around is vital for B of A to regain credibility, analysts said. Continuing controversy over the company's handling of the purchase — including dueling testimony on Capitol Hill by Federal Reserve Board Chairman Ben Bernanke and B of A president and CEO Kenneth D. Lewis — has served to shine a brighter spotlight on the executive overseeing the integration.
"This team has been fighting for their lives, and to stay ahead of all the uncertainty," said Gary Townsend, the CEO of Hill-Townsend Capital LLC. Aside from Lewis, "Moynihan has the highest profile because Merrill must be successful at more than cutting costs. It is a difficult task to take something that is broken, put it back together again and make it look pristine."
Moynihan describes the integration as on track after a rough start: Capital markets are stronger than in the prior quarter, especially the credit and equity businesses. A systems integration costing more than $1 billion is ahead of schedule and should expedite expense savings. Broker attrition stabilized in March, and hiring in the investment bank is offsetting defections. And there is optimism over several efforts to refer clients between the brokers and the bank.
"We really haven't opened the gates yet," because Merrill and B of A have not yet linked computer systems, said Moynihan, who is viewed as a possible successor to Lewis. "I'm not going to sit here and lament these difficult times. My job is to get through to the other side."
Moynihan credits the government's stress tests for soothing nerves, though B of A's test required it to raise $33.9 billion of fresh capital from stock offerings and exchanges as well as other sources. "It gave us a lever to put the past behind us," he said.
Moynihan pointed to collaboration, detailing the initiatives to improve traffic between the bank and Merrill's "thundering herd" of brokers. B of A adopted Merrill's practice of pairing financial advisers with banking specialists, adding 750 bankers to the less than 100 at Merrill.
They are pitching products such as mortgages and home equity lines.
Deposits are also a focus; a premium-rate account has ushered in $5 billion in balances in the past two months, and a certificates of deposit push landed another $1 billion.
Those efforts have been overshadowed by concerns about the investment bank and high-profile departures that have occurred this year.
Moynihan said the company had been challenged by concerns about executive compensation at companies that have gotten Tarp funds. But he asserted that the company has attracted talent from competitors such as Citigroup Inc. and UBS AG, adding 100 employees in recent months, including 40 managing directors and "several dozen" analysts.
Jefferson Harralson, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., said he believes the bleeding at B of A may be overstated, yet the investment bank remains at "a competitive crossroad" until the company is off the hook for Tarp funds. "The risk is there" for losing talent, he said. "It is incumbent upon them that they to repay those funds as soon as possible."
Moynihan deflected speculation that the integration may be his audition to succeed Lewis. Moynihan, along with fellow executives Barbara Desoer, Liam McGee and Joe Price, are viewed by outsiders as potential candidates, and all have roles in getting the company through the turmoil.
"My job is to do this job well," he insisted. "All of my colleagues have serious, big jobs that we have to get right for this company. We're working for Ken and helping him get this company to where it should be."