Bank of America Corp.'s most richly compensated executive, Thomas Montag, may become a future candidate for the top job after a shake-up elevated him to co-chief operating officer at the money-losing lender.
Chief Executive Brian Moynihan is counting on a new lineup to reverse the bank's fortunes after it posted a record $8.8 billion quarterly loss, spent $30 billion to clean up faulty mortgages and sold $35 billion of assets and preferred shares to rebuild capital. The stock has lost more than half its value since Moynihan became CEO of the Charlotte, N.C., company in January 2010.
"Moynihan knows he's in the line of fire. He'll do everything he can to save the bank," said Greg Donaldson, chairman of Donaldson Capital Management LLC, an Evansville, Ind., company that oversees $500 million, including Bank of America shares. "If for some reason he's gunned down, he knows he has to have an heir apparent. Montag is a winner, a guy bringing dollars to the bottom line, and it would be hard for the board to throw him out, should the time come."
The revamped team pairs Montag, 54, the head of global banking and markets, with David Darnell, 58, the co-COO who will supervise retail banking. It won't include Sallie Krawcheck, who ran wealth management, and Joe Price, who led the retail unit. Both will leave the company, the bank said Tuesday. Thousands of lower-level employees also may be fired in a cost-cutting plan that Moynihan has dubbed Project New BAC.
"Tuesday-afternoon massacre is what I'd call it," said Nancy Bush, an analyst and contributing editor at SNL Financial, a bank research firm in Charlottesville, Va. "Brian is under pressure, the company is under pressure, and when you're transmitting your message to so many different people, I think it's harder to get results. And clearly he was not getting results as quickly as he would have liked."
Montag, a former trading head at Goldman Sachs Group Inc., gains responsibility for commercial banking previously handled by Darnell. Wealth-management operations overseen by Krawcheck, which included the Merrill Lynch brokerage, now will be run by Darnell, who also takes over Price's former retail banking units. The two executives will preside over a company with assets of $2.26 trillion, deposits of $1.04 trillion and about 288,000 full-time employees.
Global banking and markets, led by Montag, posted net income of about $10 billion for the 18 months that ended June 30, the six quarters since Moynihan became CEO.
Darnell's global commercial banking reported a profit of $5.5 billion for the period. That compares with about $2.4 billion at Krawcheck's global wealth and investment management and $2.1 billion at the deposits segment overseen by Price. The card business, also run by Price, was unprofitable as the company booked writedowns last year after new regulations curbed fees.
The main businesses to be managed by Montag contributed $20.1 billion in first-half revenue this year, about 50% of the company's total.
"Before this, they clearly seemed to be operating without a succession plan for the CEO; at least now it looks like they've got one in place," Moshe Orenbuch, an analyst at Credit Suisse Group AG, said Wednesday on Bloomberg Television's "InsideTrack" with Deirdre Bolton and Erik Schatzker. Montag has broader experience than Darnell and is the top contender to be the next CEO, Orenbuch said.
Moynihan, Montag and Darnell "look forward to many years of work together," Larry DiRita, a bank spokesman, said by email. "This decision brings forward a new generation of talent that includes many potential future leaders of our company."
Montag received $15.2 million in bonuses for his performance last year, when his division was the company's most profitable operation, with $6.3 billion in earnings. Analysts have credited Montag's business with bolstering results at Bank of America, which has posted deficits in six of its last 11 quarters as it struggled to recover from the 2008 financial crisis and losses tied to faulty home loans and mortgage bonds created by Countrywide Financial Corp.
Darnell joined a predecessor to Bank of America more than three decades ago, as a credit analyst in Greensboro, N.C. He led the bank's middle-market unit for four years before starting as president of commercial banking in July 2005.
His new responsibilities include operations that provide deposit, card, home mortgage, wealth management, trust banking and related services, according to the bank.
Darnell, who will now oversee more than 16,000 financial advisors, said in a January interview that the Merrill Lynch brokerage was a "perfect match" for Bank of America because its members sent thousands of referrals to the commercial banking unit.
