Will Bank of America Deliver on Moynihan's Promise?

If there is one thing that can be said about Bank of America's (NYSE: BAC  ) CEO Brian Moynihan, it is that he is a man who gets things done. No one can dispute that his Project New BAC has worked wonders, so when he told a group of investors at the Goldman Sachs (NYSE: GS  ) conference last month that B of A was going to get back into the mortgage biz, I knew he meant it.

Getting those branch locations into the act
According to the Wall Street Journal, Bank of America is planning to put its newly streamlined branch network to good use -- selling mortgages.

Once a more central player in the mortgage market, B of A stepped back after the Countrywide crisis began to unfold. The bank stopped offering reverse mortgages, withdrew from wholesale lending, and decided not to accept loans from correspondent loan suppliers. The irony of the situation is that, by purchasing Countrywide, Bank of America clearly planned to dominate the lending business by acquiring the top mortgage producer of the times.

More twists of fate followed. As other analysts have noted, B of A would have come through the financial crisis with a mortgage department in better condition than some of its peers if not for Countrywide's passel of toxic loans. Also, the pullback from lending caused the big bank to lose out on the refinance craze, as its shrunken loan department was unable to cope.

Pushing its mortgage products at a far-reaching network of branch locations could help reverse all of that. As noted by analyst Scott Simon of PIMCO, mortgage lending is not just about mortgages, since loan customers are apt to buy several banking products from the same institution. That's a lot of money banks like B of A and Citigroup are missing out on, according to Simon. Both Citi and Bank of America still consider the lending business too risky -- and, therefore, continue to take a back seat to mortgage-writing overachievers like Wells FargoThis graphic shows clearly that Wells takes the biggest piece of the mortgage lending pie, followed by JPMorgan Chase. JPMorgan reported a 33% uptick in mortgage revenue for Q4 compared with last year, while Wells noted a reduction from Q3, but a 4% increase year over year. 

One Fool's take
Can Bank of America be a mortgage lending success again? Yes, but it will take time. While the bank has received praise for new customer assistance at its branch locations, it also scored the lowest on a recent customer satisfaction survey. Worst of all, however, is the fact that the bank tanked on a poll that asked respondents to rate how well their mortgage lender fulfilled their needs. Of 14 lenders, B of A finished last.

Will we see some improvement over the next 12 months? I believe so. But B of A has many rivers to cross before it can be considered tops in the mortgage lending field.

Bank of America is truly turning itself around, though this article shows that it still has a lot of work to do. To keep up with all the goings-on at the most talked-about bank out there, check out our 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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