It’s been almost eight years since Brian Moynihan took the reins at Bank of America.
The chairman and CEO of the nation's second-largest financial institution didn't break stride after being reminded of that fact.
"It seems like yesterday," Moynihan quipped during a recent visit to South Carolina.
That might not be far from the truth, assuming a monumental corporate restructuring helps the time pass by.
Moynihan was largely unknown outside the industry when he was selected to take the helm of the Charlotte-based banking giant. He's now being credited with methodically overhauling and streamlining the bloated and nearly crippled financial behemoth he inherited in January 2010, when the wounds from the last financial crisis were still raw.
That was then. These days, Moynihan is the man of the moment in the banking business. His company is coming off its best quarterly results in six years. Bank of America is on the cusp of hitting its CEO’s longtime goal of a $20 billion annual profit. Its stock market value has eclipsed that of longtime rival Wells Fargo.
"The company is performing well," Moynihan said in his trademark stoic fashion, between business meetings in Charleston this month.
Warren Buffett, the biggest shareholder in both Bank of America and Wells Fargo, sang Moynihan's praises recently, after being asked by CNBC about which bank stock was his favorite. The billionaire investor balked at first, before dropping a name.
"Bank of America has done a sensational job under Brian Moynihan," Buffett said on the cable channel's "Squawk Box" morning program on Oct. 3. "Brian had all kinds of problems when he came in. I mean, they were not of his own doing, but he had a ton of problems. And he had a lot of rocks to turn over, and it cost a lot of money. And he just set out step by step to bring the bank back. He has really done a job."
The massive housecleaning was broad, deep, expensive and, at times, both humbling and painful. Under Moynihan, the bank has cut its annual operating expenses to about $54 billion from more than $70 billion when he rolled up his sleeves in January 2010. Headcount has been slashed by 70,000 to about 210,000 employees. The branch network has been pruned back by about 30 percent, including 32 closings or sales in South Carolina. But despite the retail retrenchment, deposits have climbed on Moynihan’s watch by more than 45 percent across the franchise to nearly $1.3 trillion.
Wall Street has taken notice. Bank of America is among the top performing stocks this year among big U.S.-based financial companies. Its shares are up more than 20 percent since January.
"We will be holders of BofA stock for a long, long, long time," Buffett told CNBC last month.
Chick and the egg
Moynihan, who is trained as a lawyer, acknowledged it was a tough slog.
"There’s an old analogy that when an egg hatches and out comes the chick and everybody says, 'Oh my God, look at what happened,'" he said. "But it was all the time and the period that built up before that. The hard work that was going on to show the success we have with our clients and customers today was going on all the time over the last eight years or so."
Even so, Moynihan added, turmoil associated with the bank’s restructuring tended to overshadow any progress it felt it was making.
"The issue was that it was covered up by litigation settlements ... the work we had to do to get the cost structure down in the company and things like that," Moynihan said. "That cover’s been lifted away."
As he sees it, the major elements of the restructuring and cost-cutting are now mostly completed.
"We’re kind of done with paring away the things that didn't make sense," he said. "We have eight lines of business. They’re customer-driven. We have tremendous platforms to support those eight lines of business ... So that's in pretty good shape."
Growth is now the priority.
"The mistake people make is saying, 'OK, now you’re done with that. Now you’ve fixed all that. Now you can go do something,'" Moynihan said. "The team, they were working tremendously hard in driving the core business platform forward. And we have a concept called 'responsible growth,' and that's what we do. So we will grow. We will grow the right way, and we'll do it in a way that’s sustainable by investing in the future.
"And that bodes well for us," he continued, "as we look to grow when other people are starting to figure out, 'Well, maybe I had lent too much here, or maybe I need to work on expenses, or maybe the economy is going to keep growing at 2 percent and I have to adjust my business model.’ We can just push and drive the business forward. And it’s been very strong."
'About people now'
Moynihan, an Ohio-raised Brown University graduate who played rugby through law school and into his early 30s, oversees a company with a quarter-century-plus legacy in South Carolina — where it's the second-biggest financial institution based on deposits.
Its corporate ancestry goes back to the old National Bank of North Carolina, which stormed the Palmetto State under Bennettsville native Hugh McColl in the early 1990s by snapping up the C&S/Sovran chain to create NationsBank. It switched to the more established and better-known Bank of America brand in 1998 after a big West Coast buyout.
Those barnstorming days of growth by acquisition are long gone, Moynihan said. Because of its sheer size, Bank of America is barred from gobbling up rivals. The company, as it is positioned today, is what customers can expect to see for the foreseeable future.
"Basically this is an organic growth company," he said. "And it has to drive responsible growth, as we talk about it. So you won't see us change the structure."
His strategy going forward isn't based on old-fashioned brick-and-mortar investments, partly because of the rise of mobile technology and changing consumer patterns, though he is filling in the branch network in a few target markets, such as Denver and Minneapolis.
Moynihan said the roughly 4,300 retail offices that survived the restructuring tend to be larger. And they're likely to be staffed with a platoon of what he calls "relationship managers," such as small business bankers, middle-market lenders and financial advisers from its Merrill Lynch wealth-management arm. Moynihan said Bank of America has more than doubled its revenue-producing sales ranks to about 25,000 employees, even as it has jettisoned 1,800 walk-in branches and eliminated jobs in other areas.
"The expansion is always about people now, less about physical plant and more about people. ... We're adding relationship management people everywhere. And then we're tremendously investing in technology to keep the operational excellence of the company going. That's going to go on," he said.
The bank also is focused more than ever on risk management, to ensure the next downturn won't inflict as much damage as the 2008 version, according to Moynihan.
"We look at everything and try to be paranoid," he said.
To that end, the bank operates on three principles.
“One is that we have the company balanced," Moynihan said.
Bank of America got wise to that old-school concept after the 2008 crisis, when its overweight loan portfolio was leaning about 70 percent toward the consumer side.
"A lot of it was unsecured consumer debt, so when the unemployment rate rose that hurt us badly," he said. "Now we're 50-50 commercial-consumer. And of the consumer piece, a dominant part of it, probably 80 percent, is secured by mortgages, home equity ... and things like that. So even if you get hurt, you don't get hurt as much as opposed to a credit card that would be written off."
The bank also uses big data to assess the risks within every loan category in every market where it operates. He pointed to housing as an example.
"So as markets heat up in real estate, we’ll slow down the underwriting characteristics," he said.
In addition, Moynihan said he takes seriously the "stress tests" that the biggest financial institutions must conduct to see how they'd hold up over an extended period if the jobless rate doubles or triples overnight.
"If there's anything that goes wrong ... the idea is never to have too many eggs in one basket. ... Every day we run the 'Lehman Brothers scenario' where the debt markets got completely destroyed. Our exposure to that is nothing," he said. "So we have more capital, more liquidity. But the real way we're managing risk is not assuming we're going to get the cause of the next recession right. It is to take any cause and make sure it's not going to destabilize the company."
Moynihan called South Carolina "a good market" for Bank of America.
His visit to the Palmetto State this month included meetings with customers, employees and management. He said the bank has been "participating in South Carolina’s success in terms of attracting employers" and investment from businesses large, small and in between.
"I was just with a client last night, and they were talking about opening another factory here," he said, referring to an event in Bluffton on Nov. 2.
His trip up the coast the next day wasn't his first — or last. Moynihan has been a regular visitor to Charleston since 1992, when he started "mucking around" the city with some friends. A few of those acquaintances ended up moving to the area. Moynihan and his wife were smitten, too. They now own a vacation home on Kiawah Island.
"It’s been interesting to watch the city do so well," he said.
As the CEO of a major bank with almost eight years under his belt, Moynihan isn't playing favorites. His goal is that Bank of America thrive in all of its South Carolina battlegrounds, from the Upstate to the Midlands to Hilton Head and the Grand Strand. Exactly how that will play out "will be driven by the dynamics of the market and what's growing," he said.
"Our job is to support the economy," he said.