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Will These Punches Knock Out Bank of America?

Brian Moynihan has held the top spot at Bank of America (NYSE: BAC  ) for roughly three and a half years, and the bank's share price is down roughly 20% during his reign. That sounds ugly -- but considering the stock was down a crushing 70% for the three and half years before he took over, it doesn't look so bad.

The vast majority of the blame for the stock's spiral down is placed on former CEO Ken Lewis, who oversaw most of the bank's toxic acquisitions. But now, a few disgruntled shareholders are starting to question whether Moynihan is leading a culture of cutting corners and peeving customers in order to cut costs quickly. 

The most recent of the heated complaints comes from a familiar voice. Finger Interests Number One filed a rare Sec Form PX14A6G and lambasted Moynihan and team regarding recent accusations from former employees who were allegedly "rewarded for delaying and denying Home Affordable Modification Program ("HAMP") modifications so that Bank of America could generate more fees and steer existing borrowers to more profitable in house products."

A voice from the past
Finger Interest is a familiar voice because it has long been a critic of Bank of America's management and board since the onset of the crisis. In this clip from 2009, Jonathan Finger advocates for the removal of then-CEO Ken Lewis, who would later step down.

While Finger Interest did not call for the removal of Moynihan (the letter lauded the bank's work to clean up legacy issues and the balance sheet), the distaste for the bank's culture was palatable.

"If true, the six affidavits filed by former employees of Bank of America in the Massachusetts case are damning, and evidence of unethical behavior and, more importantly point to a corporate culture of not just "short termism", but of outright corruption and a disregard for laws, regulation, and of course, customers."

Ouch. The bank has been in recovery mode and generated handsome profits for investors who scooped up shares on the cheap in late 2011 and early 2012, but can its battered reputation with customer begin to weigh the stock down? American Banker released its 2013 survey of bank reputations, and Bank of America ranked dead last.

Can this really hurt the stock?
Despite the stigma, investors may happily overlook the scathing profiles as long as Bank of America continues to post more improved financial results. The harsh criticism makes the news and headlines, but it rarely moves the stock. Going forward, financial performance should be the single largest contributor to movements in the share price.

No bank ever wants to be cursed on Main Street, but B of A generates the majority of its revenue from its Global Banking, Global Markets, and Global Wealth and Investment Management (GWIM) businesses -- all segments that operated under a slightly different light and perception than the bank's troubled mortgage and consumer businesses, which are often the object of the public outcry.

It may take years, or even decades, for the big banks to regain public favor, but if returns on equity crank higher and balance sheets strengthen, investors will gladly overlook some unhappy customers in exchange for healthy profits.

Many investors are scared about investing in big banking stocks after the crash, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

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  • Report this Comment On June 25, 2013, at 1:05 PM, reefrocket wrote:

    These thives need to fail and fail NOW! They are stealing people's houses and NOT giving back the money we gave them (remember the TARP payments???) Failure is the option and I hope all the thieves and their related banks fail. THE THIEVES!

  • Report this Comment On June 25, 2013, at 1:45 PM, oldschooldude wrote:

    what goes around comes around, karma is a bitch

  • Report this Comment On June 25, 2013, at 3:30 PM, 110254545yy wrote:

    Bank of SATAN.

    Messed up more people than Holocaust and SLAVERY put together

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9/27/2016 4:00 PM
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Bank of America CAPS Rating: ****