Inside Financial Services

BofA Shareholder Letter: A Swing And A Miss

Brian Moynihan mails it on

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Have you seen the “six operating principles” for Bank of America that Brian Moynihan has laid out in his new letter to shareholders? Have a gander:

Be a customer-driven company.
Build a fortress balance sheet.
Pursue operational excellence and manage risk well.
Deliver on our shareholder return model.

Still awake? Hang on, only two to go:

Clean up legacy issues related to the economic downturn, primarily in the mortgage business.
Be the best place for people to work.

And on the seventh operating principle, he rested. I don’t mean to second-guess the spirit of high-mindedness Moynihan is trying to instill among his employees (sorry, “teammates”) down there in Charlotte, but if a hedge fund manager in from the planet Stevie read those six items above above, he’d have no clue that Bank of America is only two years on from a near-death experience, and is still operating under close supervision of the federal government. He’d think instead he’d found something from the CEO of First Bank of Plain Vanilla. Which BofA hasn’t been for a long, long, time. Brian, you can do better!

You’ll recall that I’m a member of that small circle of investors that actually takes CEO letters seriously. It’s one thing to go through the numbers in the back of the annual report. We spend a lot of time on them. But that letter in the front is a chance to crawl into the CEO’s head to find out what, after much reflection, he’s actually thinking about the business.

Based on this new BofA letter, Brian Moynihan isn’t thinking much of anything at all. Here, for instance, is what he has to say right up in the front, in paragraph three, under the heading “Our Vision and Strategy.”

Our vision is for Bank of America to be the world’s finest financial services company. . . . I firmly believe that we have all the businesses and capabilities in place to meet the core financial needs of customers and clients more effectively than any other company.

Oh, come off it. Put aside the fact that Moynihan can’t possibly think-no executive can-that his company, by itself, can do a better job serving every customer, in every business line, every time, than any combination of competitors can. That’s ridiculous. But Moynihan seems to think he can convince his shareholders that he believes that. Every CEO wants his company to have a certain type of investor base. Brian Moynihan seems to want BofA’s to be made up entirely of morons.

And BofA wants to be the “world’s finest financial services company”? Really? When I first read that-and you’ll forgive me if this has scary connotations-I couldn’t help but remember how Enron used to bill itself as “the world’s greatest company.” It was an aspiration so broad as to be, as we now know, utterly meaningless. So when Moynihan says now that his goal for BofA is to be the world’s greatest financial services company, he might as well be saying he has no goals for the company at all. Wonderful.

The whole letter, all six single-spaced pages, is like that-crammed with platitudes, clichés, empty ideas, and big-banker jargon. When I was done, I didn’t have any better idea of what Moynihan’s plans for BofA are than I did when I started. That’s a shame. Bank of America has just been through the four most tumultuous years in its history. The company has a new management team at the start of a fresh cycle, and has an opportunity to remake itself however it likes. I would have been very, very interested to read Moynihan’s thoughts on where he plans to take BofA, and what the company might look like in, say, five years. Instead he gave shareholders a generic shareholder letter that could have been put out by any bank in virtually any year since the invention of the OCR reader. It’s pathetic-and, for BofA shareholders, not an encouraging omen of things to come.

Brian Moynihan is a very bright and capable guy. His letter this year is surely a one-off. I can only hope and assume that he’ll put more thought and effort into letter to shareholders next year, and in the years to come after that.

What do you think? Let me know!

23 Responses to “BofA Shareholder Letter: A Swing And A Miss”

  1. Anonymous

    This reinforces my feelings that Wells Fargo led by CEO John Stumpf has a far brighter future than does
    BAC.

  2. Anonymous

    Damn thing reads like a DeSants & Brown DLJ investment banking bank stock buy recommendation.

  3. Anonymous

    Couldn’t have said it any better. Where is this company going and how? Why not start out with the picture of BofA five years from now and track the path to get there. Isn’t that how one sets goals and establishes annual plans with rock hard objectives?

  4. John O

    Tom Brown and BankStocks.com are hypocrites. They have no virtue. Historically, they tout positions via this website, liquidate their positions, then you will hear no follow up. So, when I read this vitriol, it carries no weight; I can only laugh. Bankstocks.com has no substance, in my view. They will leave you hanging.

  5. Tom brown

    John o,
    Bankstocks.com must have some virtue; you are still reading! And thousands of others read as well. its a free website! We don’t have time to comment on everything

  6. John O

    Tom, Not asking you to comment on everything. Comon sense dictates that you have a responsiblity to follow up on your passionate ravings of compelling value. When people read and buy into your rhetoric they will invest their hard earned money. It is not appropriate for you to quitely liquidate when your opinion changes without so much as a comment. I can deal with losses; no problem. But you have raved about particular stock valuations, then liquidated and said nothing. It’s just not ethical, in my view. And your disclaimer, “If we change our mind about a company, we won’t necessarily post a story to say so,…” does not justify the practice. It’s just not right. You leave us hanging.

    I no longer read this site regularly. Just check in monthly to see what’s going on. I feel as though much of this is propaganda to serve you.

  7. John O

    Tom, Not asking you to comment on everything. Comon sense dictates that you have a responsiblity to follow up on your passionate ravings of compelling value. When people read and buy into your rhetoric they will invest their hard earned money. It is not appropriate for you to quitely liquidate when your opinion changes without so much as a comment. I can deal with losses; no problem. But you have raved about particular stock valuations, then liquidated and said nothing. It’s just not ethical, in my view. And your disclaimer, “If we change our mind about a company, we won’t necessarily post a story to say so,…” does not justify the practice. It’s just not right. You leave us hanging.

    I no longer read this site regularly. Just check in monthly to see what’s going on. I feel as though much of this is propaganda to serve you.

  8. JRG

    In reality theses principles are probably ok and would be appropriate for any bank. The issue is how are you going to get this done. Will he swear off value destroying acquisitions, avoid high risk short term focused growth strategies and manage for the long term?The quest for short term earnings growth has led to the poor returns we have experienced in the industry. There is no magic business strategy yet to to be tried to create value for banks like BofA. IMO its about reducing earnings voliatility which means following conservative risk management practices. In some years banks will not be able to meet their desired earnings target without taking excesssive risk.If you have the disipline to avoid these aquistions and growth strategies you might do ok. Look at the Canadian banking system for an example

  9. jimbo

    Yup….sadly true –though I still hold the shares. This has been a great option write while a great nothing gets off the ground. Ol’ Cramer got it right with his characterization of Moynihan as “Sad Sack.” The declaration that we (at long last) shareholders now come first come at a time where there is nothing to offer.

    There is something, however. Milk the customer. I still like BAC for having forced selldown of chinese assets and big american mortgage recovery play with steady pay servicing that pool. Stickiness with the government will draw from its strength–which is recovery. And, at long last, we are recovering.

  10. Don't Bank on America

    Good points, Tom. Moynihan sounds (and looks) like a frat boy who turned in a plagiarized term paper for a required course he rarely attended. In my neck of the woods (resort town California), BoA seems to target recent immigrants with minimal education and financial means. I don’t know any discerning individuals who bank there. BoA is are the McBank of America. I suspect we’ll see their share price back in single digits when The Great Recession, Part Deux strikes America–after Uncle Ben’s free money is pulled away in an inflation panic attack.

  11. JRK

    well said, he’s a dud….i own 20,000 share despite him, I hope he has a good team because he can’t lead. Every time he’s on CNBC I go for the sell button.

  12. Firefighter

    And at the end of it all, you utter your own platitude: “Brian Moynihan is a very bright and capable guy.”

    Where do you get that, what’s your basis for it? Are we supposed to just take your word for this? His principal experience has been in fomenting and implementing acquisitions. He’s a lawyer. Hmmm…is that why you think he’s “bright and capable?” Take a look at his recent interview in “American Banker.” Same platitudes.

    He’s simpleminded. He thinks that his job is to be a cheerleader. Don’t want to believe it?

  13. rbpod

    Right on. As a BofA retiree, I am embarrassed by the ineptness demonstrated by our current leaders. I believe they should set out some real goals on hove they will get investors back into the bank and return to paying dividends to the stock holders. I am sick of all the various schemes the board of directors come up to pay these bozos. Somone needs to go to jail for the past failures. The new leadership may then take notice and chage the way of doing business and follow a real plan.

  14. etoleary

    A little humble pie for plight of the shareholders who were taken for a long detour by Moynihan’s predecessor would be in order too.

    Maybe Moynihan can get away with saying “This is the way it is” within his company but you’re right, Tom, it’s not very credible.

  15. The Ex customer

    After years of having a relationship with the bank, my mortgage, bank accounts, and wife’s merchant account I can tell you it is now bank by the numbers. I cant have a relationship with any manager, they can no longer make decisions. The managers hands are tied is what I was told. Great focus on the customer. We are also not long or short the stock as I can not figure out where it goes. Most funds would most likely think it cant be that bad but I think it is.

  16. Medusa

    I could not agree more with you. I am a retiree from Bank of America (with worthless stock options and a much lower 401 K). I love l this company and I always will. However, in the entire time I worked for Bank of America, the issues that are a problem to day occurred in the past – over and over. How can such a large and fine (in the past) institution make the same mistakes over and over?

  17. Matt Hall

    My wife was on hold 17 minutes to do a simple CD rollover. She finally hung up and called her personal banker who took care of it. So yes, there are still lots of service problems, etc. That said, here in California it remains ubiquitous and there’s a lot of goodwill from long term customers. They have the ingredients of a sustainable turnaround which we’re seeing. As for Moynihan, with the exception of writing, granted, an inferior letter, have there been any serious stumbles you can point to since his team took over? They may not be doing anything brilliantly but they don’t seem to be making any big errors. That in itself is encouraging.

  18. Curious George

    A buddy from BAC called the departure of Lewis about a year before his departure. He is calling for the same now with Moynihan. He simply says (paraphrasing) “you can’t fail to deliver when so much capital is employed and firms all around you are not stumbling. It’s kind of like Obama. You get some time, but not forever. If BAC doesn’t turn quite soon, Brian will be gone.”

    If my pal is right, then the housing exposure almost ensures that Brian will soon be playing golf as his firm has got gobs of it, and is not as adept as say WFC at using accounting techniques to amortize the huge embedded losses.

    I find this interesting because, should he get pushed, new blood (if it is not legacy Merrill) could use the opportunity to take the bath, raise the capital, and then allow BAC to capitalize on what should be an amazing franchise. That is when I will be a buyer.

  19. Joker

    As a CEO, Brian Moynihan has to say what he had to say. That is what the job needed. On the other hand, what is the point of this (above) article? Obviously making fun of the letter. But is that your job to make fun? If so, why not become a comedian?

  20. ACEMAN

    THE BOA is pathetic, indeed. In Northern California suburbs, BOA has practically disappeared from view. There are empty banks, rediculous advertizing and stupid tellers and brain dead managers who know very little about banking and what the BOA is advertizing. As a daily user of BOA’s online banking system, what was once state of the art is now coming apart at the seems and so it has become unreliable. Question: does the CEO ever use his own online system? or ever visit a local bank other than the 50 story monster in downtown San Francisco on California Street? I think not. North Carolina does not have the same problemsor needs as Northern California and it is reflected in Moynihan’s simplistic letter.No wonder we had a banking crash with these Yahoos in charge! PS. How do you know that he “is a very bright and capable guy”? He showed he was one of the talking Dummies before the Congressional Inquiry.

  21. ACEMAN

    Yo Medusa! How can you love an instituition that has screwed you! and continues to screw millions everyday?

  22. Anonymous

    I THINK BAC NEEDS A LOT OF HELP AND THE NOT CUSTOMER DRIVEN ALL THEY DO IS LIE TO THERE CUSTOMERS. IN MY CASE I PULLED OUT OF BAC FOR THERE LYING AND IAM TRYING TO GET MY HOME LOAN OUT TO THERE JUST DISHONEST AND COULD CARE LESS ABOUT THE CUSTOMER BASE. ITS SO BAD NOT ONE MANAGER HAS CALLED BE BACK AFTER A DOZEN ATTEMPTS. DON’T DEAL WITH BAC YOULL BE SORRY.

  23. Anonymous

    I agree with your assessment but it’s typical of all such letters.

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