Bank of America reshuffles its management
Move essentially creates 2 units
NEW YORK - Bank of America shook up its top management team yesterday, as the beleaguered financial firm contended with a flagging share price and mounting legal liabilities.
As part of the reshuffling, the bank announced the departure of two senior executives, Sallie L. Krawcheck, one of the top women on Wall Street, and Joe Price, a bank veteran.
David Darnell and Tom Montag were named co-chief operating officers, in newly created positions that will report directly to chief executive, Brian T. Moynihan.
Montag will oversee the banking and markets activities, including Bank of America Merrill Lynch, which he headed previously. Darnell, currently head of global commercial banking, will run all of the consumer businesses, including wealth management and home loans.
The reorganization - which essentially splits the sprawling empire into two main units, one focused on consumers, the other on businesses and institutions - comes as Bank of America Corp. faces an erosion of investor confidence. Amid growing losses linked to the mortgage crisis and fears that its capital cushion was insufficient, the financial firm has been pummeled, the laggard stock in an already troubled industry.
Bank of America got a brief respite from its market problems last month when the billionaire Warren Buffett’s Berkshire Hathaway Inc. made a $5 billion investment. In the days that followed, the stock rose steadily.
But the company’s legal problems continued to pile up, once again putting pressure on the stock. On Friday, federal regulators filed suit against Bank of America and 16 other firms, accusing them of misrepresenting the quality of mortgages that they sold to the housing giants Fannie Mae and Freddie Mac.
Shares of Bank of America closed at $6.99 yesterday, off about 50 percent since the start of the year.
With Bank of America staggering under the weight of soured mortgages, most of which were acquired when it bought Countrywide in 2008, there has been speculation that a broader reorganization of the company could be in the offing. Options might include spinning off its highly profitable Merrill Lynch unit and putting Countrywide into bankruptcy, but bank officials say both scenarios are highly unlikely.
The company, in an effort to reduce costs and increase profits, is set to review proposals for Project New BAC, an internal initiative aimed at making it more nimble. It is expected to cut 10 percent of the overall workforce over the next few years, according to a person with knowledge of the matter.
The cost savings associated with the departures of Krawcheck, the president of global wealth and investment management, and Price, the president of consumer and small business banking, are potentially substantial. Krawcheck made $6.2 million in 2010, and $1.9 million in 2009, the year she was hired. Their teams also include large support staffs.
The shake-up marks the second time this year that Moynihan has changed his management team. He named a new chief financial officer, Bruce Thompson, to succeed Charles Noski, who left to tend to “a serious illness of a close family member.’’ Gary Lynch of Morgan Stanley was selected to become the global chief of legal, compliance and regulatory relations, a new position.
Krawcheck was hired in August 2009 by Kenneth D. Lewis, then the company’s controversial chairman and chief. Under the terms of her employment agreement, Krawcheck could collect $2.4 million to $4.7 million in previously awarded stock grants, as of the end of December, according to an analysis of a regulatory filing by The New York Times and Footnoted.com, a division of Morningstar. She may also negotiate a separate severance package.
Price’s departure closes the book on a long career at Bank of America, which he joined in 1992 from PriceWaterhouse. He is no stranger to shake-ups at the bank, serving as auditor general, risk manager, and chief financial officer. His most recent move came in early 2010, when Moynihan tasked him with overseeing the consumer bank.
Under Price’s leadership, the division has seen mixed results. The credit card portfolio has bounced back from the depths of the crisis, more than doubling its net income in the first half of 2011. But the bank’s deposit business has gradually reported lower returns over the last year.
Moynihan, in a statement, praised the efforts of Krawcheck and Price at Bank of America, saying “delayering and simplifying at the scale in which we operate requires difficult decisions. We wish them well and look forward to their continued leadership and business successes in the future.’’