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BofA CEO calls board decision on chairman ‘right thing to do’

BofA CEO calls board decision on chairman ‘right thing to do’

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BofA CEO calls board decision on chairman ‘right thing to do’

 

 

Piggybankblog posted on 12/19/14

Repost from charlotteobserver.com

 

Bank of America CEO Brian Moynihan on Friday defended the Charlotte bank’s decision earlier this year to give him the chairman’s title, saying the lender’s board was following best practices for corporate governance.

“The board’s view is that to become more of a normal company, like our peers, it was the right thing to do,” Moynihan said in a wide-ranging, half-hour interview with the Observer.

Moynihan, who is entering his sixth year as CEO next year, made strides in 2014 resolving mortgage-related lawsuits and saw his stock price climb 13 percent, better than the rise in the S&P 500 Index. But he’s still under pressure to boost the bank’s profits.

In his tenure, he has focused on cutting costs, but he said in the interview that Charlotte’s headcount of roughly 15,000 has remained stable, adding he’d “expect it to continue to be such.”

The bank announced in October that Moynihan would be the bank’s first chief executive to hold the chairman post since Ken Lewis was stripped of the title five years ago. Bank of America split the roles after shareholders in 2009 voted to separate them in the fallout from the bank’s handling of its Merrill Lynch purchase.

The move surprised some investors and corporate governance experts who argue that splitting the roles provides a better balance of power. Some large investors have asked the bank to hold a shareholder vote on the bylaw change at its shareholder meeting in the spring.

Moynihan did not say whether the bank will put the issue to a shareholder vote. But he said the bank will continue to talk to shareholders about their views on the issue. “I think that’ll play out in the next few months,” he said.

In combining the roles again, the bank made board member Jack Bovender Jr. its lead independent director. Moynihan said Bovender, a director since 2012, will lead the board. The bank last had a lead independent director when Lewis held the CEO and chairman positions.

“If you look at the modern thought process around board governance, the title of chair is not the key,” said Moynihan, who replaced Lewis in January 2010. “The key is to have a strong independent board leader, and that’s what Jack is.”

Here’s what Moynihan, who planned to spend time this weekend with his parents in South Carolina, had to say on other issues:

On rolling back regulations

This week, the banking industry scored a victory when President Barack Obama signed into law a spending bill that included a repeal of a rule from the Dodd-Frank financial regulation bill, which was created in response to the 2008 economic meltdown.

When asked if he personally made calls to members of Congress to push for the change, Moynihan said the bank works with trade associations and has representatives in Washington who communicate with lawmakers.

The repeal removes a requirement that banks separate risky trading in complex instruments called derivatives into units that would not be backed by federal deposit insurance.

Some companies use derivatives to hedge financial risks. But bad bets on derivatives led to American International Group receiving one of the biggest bailouts, $182 billion, at the height of the financial crisis.

Moynihan said Bank of America does not place its own bets on derivatives. But he said they are an important product for its customers.

“We’ve got to serve customers,” he said.

“The notion of derivatives is they are very core to the real economy. … And our job is to supply.”

On his fifth year as CEO

Moynihan, 55, joked that his hair is grayer than it was when he became CEO. He also said the bank is a stronger company than it was five years ago, when the financial crisis was unfolding.

“You’ve got more capital, more liquidity, the company’s simpler,” he said.

The bank’s satisfaction ratings with customers is up, and its number of customers is rising, he said. “So we feel very good,” he said.

But the bank still faces challenges. In the first nine months of this year, the bank posted a profit of $1.8 billion. That’s down 78 percent from its profit in the same period last year, largely because of this year’s litigation costs.

Investors are also looking for the bank’s stock price to rise. Its shares closed at $17.62 Friday. That’s far below the peak in 2006, when the shares traded for more than $50.

When asked why the bank’s stock price isn’t higher, Moynihan pointed to a number of factors, including investors’ outlook for the economy and questions about where interest rates are headed.

“I always think it’s a great buy,” he said of the bank’s stock. “I always want more (of an increase), because that’s a measure of our success, but the stock’s performed well this year.”


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