5 Big Hits and Misses for B of A CEO Brian Moynihan

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He made it through another year. Bank of America (NYSE: BAC  ) CEO, Brian Moynihan, celebrated his third anniversary (or birthday, if you like) in mid-December. Let's take a look back at Moynihan's tenure for his greatest hits (and misses), and what it means for B of A and investors going forward.

MISS: Debit-card fee debacle
All hell broke loose in 2011, when the news that customers from most of the nation's banks would be charged $5 per month to use their debit cards. More than 20,000 customers vowed to leave Bank of America if saddled with fees, regardless of methods to negate the fee (i.e., setting up a direct deposit).  Rival banks quickly dropped their fees, leaving B of A in the dust.

As former head of the bank's retail segment, Moynihan had a history of opposition toward fees. In late 2009, he spearheaded the abandonment of B of A's reliance on revenue from overdraft fees. Conscious of the customers most affected by the fees, generally those with low income, Moynihan made the effort to ease their burden. Eventually it proved to be costly for the bank, with revenues down 22% between 2009 and 2011 .

But there was a distinction that made the new fees more palatable for Moynihan -- they're usage fees, not punitive ones like the overdrafts had been. Customers were charged for a service provided. It may have been this distinction that caused the bank to delay revoking the fees, fueling customer ire.

HIT and MISS?: Project New BAC
On one hand you have a renewed focus on building a stronger company. On the other hand, you have job cuts -- a necessary evil to achieve company goals. The bank's plan to shed 30,000 jobs would save it $5 billion. And though the company spouted reassurances that attrition and elimination of open positions would make up a substantial portion of that number, it gave many Americans a bad taste since the country had been struggling with high unemployment for years.

Otherwise, Moynihan's Project has been a success story. By putting non-core business segments up for sale and refocusing attention to the core functions of the bank, he's made it a leaner, simpler business. The initiatives have also helped clean up B of A's books, reducing non-performing loans as a percentage of the bank's loan portfolio from 4.4% in 2009 to 2.9% as of Sept. 2012.

Moynihan may have been at the helm while the bank posted huge losses in 2010 and parts of 2011, but his vision and leadership have helped return Bank of America to profitability -- with more room to grow in 2013.

HIT: Legal settlements
Bank of America has undoubtedly had the toughest time recovering from the financial crisis. With its acquisition of Countrywide, sub-prime mortgage-underwriter extraordinaire, legal woes continue to haunt Bank of America and its investors. But Moynihan's approach to these troubles is right on target -- rip off the bandage and move forward.

Just yesterday, the bank agreed to a $10+ billion deal with Fannie Mae to settle mortgage claims from the housing bust. The deal garnered positive and negative responses alike, even within the walls of the Fool. All in all, the bank has agreed to $32 billion in settlements  -- a massive hit, even for the largest bank in America.

But the recent deal looks to prevent further governmental litigation, something that will give the company and its stock a much needed reprieve. The uncertainty of legal fees and penalties has continued to plague Bank of America, and kept investors away. With the newest settlement, the light at the end of the tunnel is getting brighter.

HIT: Warren Buffett investment
I recently examined the impact of Berkshire Hathaway's (NYSE: BRK-A  ) 2011 investment in Bank of America, and whether it was responsible for the bank's impressive 2012 rebound. And although I came to the conclusion that it was not the determining factor behind B of A's price doubling, it was an extremely important event all the same.

Buffett's investment in Bank of America was based on his belief that the company was strong and had great management. This vote of approval was a much needed boost for the bank, which had recently posted an $8.8 billion loss and was losing investor confidence left and right.

Moynihan was reluctant to accept Buffett's bid at first. The CEO had been reassuring Wall Street that the bank was financially solid, and it didn't need to raise capital, despite losses. Moynihan's final acceptance of the investment solidified his position as a pragmatic and logical leader -- one who is willing to set aside pride to do what's needed for his company.

HIT: Basel III capitalization
Following the financial crisis, most analysts  wrote off Bank of America as the worst of the nation's banks. This included views of the its capital position and even its viability in the future. But as of its Sept. 2012 earnings release, analysts began singing a different tune.

Under Moynihan's Project initiatives, the bank has raised the most capital in preparation for implementation of the new Basel III capital requirements.


Tier I Capital Balance

Capital Ratio under Basel III

Bank of America

$136.4 billion


Citigroup (NYSE: C  )

$106 billion


JPMorgan (NYSE: JPM  )

$139 billion


Wells Fargo (NYSE: WFC  )

$111.4 billion


US Bancorp (NYSE: USB  )

$29.6 billion


Source: Company Q3 2012 earning presentations.

With the recent announcement of regulators easing the Basel III requirements and extending the benchmark dates, Bank of America has even more breathing room to continue expanding and improving its core business without concerns of capital. 

So far, so good
Within three years, the leadership of Brian Moynihan has helped Bank of America back from the brink of disaster. While that's certainly something to celebrate, the bank has been more active than the five hits and misses listed above. If you're thinking of investing in Bank of America, take the time to decide for yourself whether the bank's progression is on target. To help you learn more about the most talked-about bank out there, our top financial analysts have created an in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.

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