Here's Why the Media Is Wrong About Bank of America

It's become clear that Bank of America (NYSE: BAC  ) can do nothing right in the eyes of the media. After spending years castigating the nation's second-largest lender for its admittedly abysmal record on customer service, along with a laundry list of other offenses, the financial press is now rebuking B of A's efforts to fix the problem.

On Tuesday of last week, CEO Brian Moynihan said in a letter to employees that the bank must clean up its act if it wants to compete with the likes of JPMorgan Chase (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) , both of which have placed service at the center of their growth strategies. The letter highlighted efforts to improve customer communications and make services more accessible by locating investment specialists and mortgage loan officers in branches throughout the country.

The bank's executives also announced at a company event on Thursday that a new marketing campaign is in the works. Its purpose is to repair B of A's image, which has remained tarnished in the eyes of consumers since the financial crisis. "It just boils down to being better than we are today," Moynihan said in a video played at the gathering.

It's tempting to think the media would welcome B of A's mea culpa with open arms. But the reality couldn't be further from the truth. An headline by DealBreaker read: "B of A to Spend Mortgage Savings Telling Everyone How Not-Horrible It Is." Referring to Moynihan's quote above, the hyperbolic publication quipped: "He's just a branding executive's dream-come-true isn't he?" A Foolish colleague of mine referred to the bank's moves as an "attack of the warm and fuzzies."

Although admittedly entertaining, takes like these miss the point. B of A isn't like JPMorgan, which believes that it should be thanked regularly and profusely for gracing the world with its thinly veiled self-interested deeds. And unlike Citigroup (NYSE: C  ) , B of A's entire history hasn't been predicated upon a patent disregard for legal and/or regulatory authority.

The reality is that, at least over the last few years, B of A has done more than its fair share of atoning for the sins of others. What I'm referring to is its 2008 acquisition of Countrywide Financial, which saddled B of A with tens of billions of dollars in liability associated with fraudulently originated mortgages. Had the bank not purchased the mortgage originator and thereby assumed its liabilities, hundreds of public and private mortgage investors would have been left without pecuniary recourse for Countrywide's pre-acquisition frauds. While Countrywide committed the crime, in other words, B of A is doing the time.

This isn't to say that B of A doesn't have its own crosses to bear. After all, under the unfortunate and regrettable stewardship of Ken Lewis, the bank did voluntarily purchase Countrywide and participate in the securitization extravaganza that fueled the financial crisis. But there's a difference between doing something even prodigiously stupid and doing something criminal, which is how I'd describe Countrywide's operations prior to 2008.

Beyond this, and much more critically for B of A's shareholders, the bank's moves serve as tangible evidence that the weight from the crisis may finally be lifting from the bank's operational and financial shoulders. In the news release announcing its third-quarter financial results last year, CFO Bruce Thompson noted that the executive team has now turned its attention to "driving core earnings," as opposed to managing liability from legacy issues. The bank has since renewed its aspirations in the mortgage market and, if the reports from last week are true, doubled down on the importance of customer service. 

It's in this context that the bank's announcements from last week should be read, as the change in focus could be a harbinger of lower expenses and higher revenue to come.

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  • Report this Comment On February 05, 2013, at 6:27 PM, topbeancounter wrote:

    Before anyone gives B of A a break, Brian has to first acknowledge that his own mortgage portfolio contains a tremendous number of problems. They took a tough acquisition (Countrywide) and brought in folks to run it that were clueless, moving aside the thousands of good folks at Countrywide. Yes, there were definitely some bad apples at Countrywide, but B of A just made the problems a whole lot worse. At least he has stopped his all-too-frequent sentence structure of a noun, a verb, and Countrywide did it to us. Good thing Warren came along and loaned him $5 billion. Otherwise, he would have had to admit his smoke and mirrors routine.

  • Report this Comment On February 05, 2013, at 6:27 PM, LeeG3 wrote:

    As a B of A customer, I have had two occasions in the last three months where the "backoffice" part of the bank screwed up. Even when I told them what the problem was on the first mistake, it took them almost a month to fix. So I would have to say that they can have all of the marketing campaigns that they want but until they actually get better at customer service, there is no reason to believe them.

    A second point is that the robo-signings were NOT done by Countrywide but were done on B of A's watch so there is plenty of blame for which the B of A management was responsible.

  • Report this Comment On February 05, 2013, at 8:37 PM, hanover67 wrote:

    BofA has an enormous consumer franchise giving them lots of cheap deposits. They retrenched internationally, have had to deal with the Countrywide debacle, and overpaying for Merrill Lynch. They need to focus on the blocking and tackling of banking - making good loans, one at a time, rather than by the 'portfolio." My local branch in California has had constant turnover for two or three years, so the managers don't know the community and vice-versa. As for customer service, my wife spent over an hour today "on hold" trying to resolve an online banking issue. I used to work for another bank and we referred to BofA as "the world's largest S & L."

  • Report this Comment On February 06, 2013, at 11:08 AM, neelvk wrote:

    I have been a B of A customer since Feb 1999 (14 years). And I am a premier customer of theirs. Yet they treat me like a stranger every time I call or visit one of their branches. Their fees are outrageous and interest I earn is pathetic. For my mortgage, I get better rates when I go through a mortgage broker than when I go to them directly!

    They have tried and tried to lose me as a customer. The only thing keeping me there is the web of autopay that I do not want to disturb. I tell all young folks to open an account with a credit union and be far happier.

  • Report this Comment On February 06, 2013, at 4:47 PM, LeeG3 wrote:

    I should add to my comment earlier. I didn't choose B of A as my bank; they bought out the bank that I was using. And I am like NEELVK, if the autopay option wasn't one of the features of my account, I would have moved to a different banker years ago.

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