Bank of America Corp. preserved the mold – and addressed its longer-term future – by tapping Brian Moynihan late Wednesday to succeed Ken Lewis as chief executive.
The Charlotte company's board announced after meeting in Charlotte that Moynihan, a company veteran who this fall became head of consumer and small business banking, would serve as CEO. He will succeed Lewis on Jan. 1.
Moynihan, 50, for months had been viewed as an obvious candidate due to his close ties to Lewis and a multifaceted role within the company that included stints as the general counsel and head of wealth management and investment banking. His appointment to run the retail bank was viewed as a way of rounding out his resume.
Anthony Polini, an analyst at Raymond James Associates, said Moynihan made for a logical choice. "He is a very capable guy," Polini said. "It was a less disruptive selection than an outside candidate," he said.
Gary Townsend, the CEO of Hill-Townsend Capital, expressed skepticism over Moynihan's retail experience. "We need someone with instantaneous credibility who is strong in retail banking," he said. "Moynihan is in that job now but he has only been there for" a few months.
Choosing Moynihan appears to endorse the business model built over decades by Lewis and predecessor Hugh McColl Jr., including coast-to-coast retail banking and market leading positions in mortgage, credit cards, brokerage and investment banking. Moynihan was picked to run the investment bank in January following the ouster of former Merrill Lynch & Co. CEO John Thain.
"The selection says that while the economy and recession have been lousy, the board still believes that the company model is intact," Polini said. "It is a vote of confidence for the strategy."
In an interview Wednesday evening, Moynihan did not provide details of his plans but emphasized the board's support of the company's current business model and his familiarity with many of his colleagues.
"The core businesses that we have arranged with hard work over last 5-10 years are second to none," he said. "The issue is we have the best franchise, and we have been through a tough economic cycle. We just need our team to execute. We have cleared a lot of things in the last few weeks."
He also said the company "must continue to weather the recession and repair the balance sheet and [address] credit over the next 12 months. …The key is the economic recovery. If you look at what most people believe the economy is getting better. We just have to execute."
Lewis plans to step down at yearend, and choosing Moynihan over other high-level candidates runs the risk of defections, some said. Barbara Desoer, who runs mortgages and insurance, chief financial officer Joe Price, investment banking head Tom Montag, and Sallie Krawcheck, who oversees wealth management and brokerage, were also viewed at times as viable options.
"What will inevitably happen is that some percentage of folks will go away," said Thomas Watkins 3rd, a partner at recruiting firm Chartwell Partners.
Moynihan has maintained a relatively high profile at B of A since joining the $2.39 trillion-asset Charlotte company in 2004 when it bought FleetBoston Financial Corp., where he was a top lieutenant to chairman and CEO Charles Gifford. Many observers said he appeared to be a frontrunner because Gifford, along with Thomas Ryan and Thomas May, former Fleet directors, were on the committee charged with finding Lewis' successor.
Moynihan has been dealing with political baggage tied to involvement with B of A's hastily arranged and oft-criticized purchase of Merrill. Much of the attention focused on a decision last December to tap him as general counsel, which occurred shortly before B of A threatened to scrap the deal. The issue was front and center at a Nov. 17 Congressional hearing, where he was grilled over his knowledge of rising losses at the New York investment bank.
Polini said he believes B of A's board may have wanted to tap Moynihan earlier in the process but was discouraged by the Treasury Department and regulators. "I think the initial thumbs down was part of a [larger] political battle," he said.
Lewis triggered a succession crisis on Sept. 30 with his unexpected yearend retirement announcement in a move that seemed to catch the board flat-footed. Lewis reportedly encouraged the board to consider Curl or Moynihan, though he also left open the possibility of an outsider. It is unclear how much of his advice was seriously considered by the board. (Many observers thought Curl, 61, would have been tapped as an interim solution.)
The board formed a six-member committee to oversee the search. In addition to Gifford, May and Ryan, the group included chairman Walter Massey, all of whom were on a special committee to review strategic initiatives. The search committee also had former Federal Deposit Insurance Corp. chairman Donald Powell, who joined the board in June, and DuPont Co. chairman Charles Holliday, who became a director in September.Russell Reynolds was hired to assist the committee.
The search to replace Lewis had taken on a plodding and often embarrassing pace over the past two months, with two self-imposed deadlines extended and numerous candidates rejecting the company's overtures.
Powell said in an interview that the board was "committed to getting the best candidate, whether it was from the inside or outside." He said that Moynihan represented an executive who "understands the culture at B of A and how to run a complex organization," particular in dealing with investors, regulators, and customers.
Regarding outside influence, Powell said that the committee "listened to anybody who had thoughts" about the post, including regulators and investors. "At the end of the day, though, this was the board's decision," he said.
Some observers believe the board ideally would have named Curl or Moynihan to succeed Lewis after a brief search process, but had to nix that plan when the government and shareholders pushed for an outsider. "I think the entire board underestimated the amount of time it has taken to identify a suitable candidate," said D. Anthony Plath, a University of North Carolina at Charlotte finance professor who closely follows B of A's board.
B of A's repayment last week of $45 million in government capital may have given the board the ability to move forward by removing pay restrictions and giving the new CEO more freedom to chart a strategic course. It may have also given directors greater leeway to select an insider, some observers said.