Herd feels heat
Too big to succeed.
That’s the problem that Bank of America boss Brian Moynihan is wrestling with as he looks out over the financial empire disgraced Chief Executive Ken Lewis left in his wake.
Moynihan is struggling mightily to keep the bull — the logo that has traditionally represented Merrill Lynch — in the BofA barn.
The embattled CEO is embarking on a plan to trim the bank’s sprawling enterprise by as many as 30,000 staffers over the next year or two.
The cuts are expected to occur not just at the junior levels but among some of the bank’s most senior ranks.
The depth of the cuts was on display Tuesday with the surprise dismissals of Sallie Krawcheck, who ran the bank’s storied thundering herd of brokers at Merrill, and Joe Price, who was in charge of the firm’s consumer business.
Sources say one factor that may have played into Krawcheck’s ouster was that she had applied to take over retiring MetLife CEO Robert Hendrickson’s post, which upset Moynihan.
However, sources close to the bank’s executives said that the move was not a factor in her departure.
“Brian had tough decisions to make in the context of a reorganization that removed a layer of management and simplified the company. It was a difficult but necessary business decision,” said a spokesman.
BofA also promoted David Darnell and Tom Montag as co-chief operating officers — a reshuffling meant to streamline the bank’s reporting lines.
In any case, Moynihan appears to be resisting external calls to break up the firm cobbled together via a series of mergers, including the acquisition of Countrywide Financial and Merrill during the darkest days of the housing collapse.
At meetings in the coming days, Moynihan is expected to discuss plans to make additional cuts at the firm.
“The view that [the bank] would sell its best division has always been incorrect,” said Dick Bove, bank analyst at Rochdale Securities.
Downsizing the behemoth franchise without cutting too deeply and hemorrhaging profit-generating talent the firm wants to keep is a delicate affair.
Darnell, who heads the bank’s brokerage arm, was forced to reach out to brokers yesterday to assure them that compensation packages wouldn’t be retooled as a part of the bank’s strategy.
Sources estimate that Merrill could be worth as much as $30 billion in a sale or spin-off. BofA could also look to unload US Trust, which the bank acquired for about $3.3 billion in 2006.
