Bank Of America Departures Thin The Ranks at The Top

By Christina Rexrode And Peter Rudegeair 

        Bank of America Corp.'s bench is getting thinner at a crucial point in Chief Executive Brian Moynihan's turnaround.
        The Charlotte, N.C., bank Wednesday announced two surprise departures of senior executives, leaving a hole in the bank's succession plan and raising questions from analysts about stability atop the bank.
        With the planned exit of Bruce Thompson as chief financial officer and 36-year veteran David Darnell as head of wealth management, there are two fewer senior candidates who could replace Mr. Moynihan as chief executive if he were to leave. The moves highlight one remaining executive, Thomas Montag, as a key candidate to potentially rise to the CEO job, if Mr. Moynihan were to step down unexpectedly.
        Bank of America and Mr. Moynihan have been under pressure in recent months due to a share price that has lagged behind those of other banks and a request by the Federal Reserve that Bank of America resubmit its annual "stress test." Those exams help regulators evaluate how the lender would perform in times of trouble.
        In a memo to employees Wednesday, Mr. Moynihan praised Messrs. Thompson, Darnell and Montag.
        The bank declined to make the executives in this article available for comment.
        Bank of America has "a long history of management instability," Dick Bove, an analyst at Rafferty Capital Markets, wrote in a report Thursday. Paul Donofrio, 55, who will succeed Mr. Thompson, will be the fifth person to serve as CFO during Mr. Moynihan's 5 1/2 -year tenure, though other key executives have stayed at the bank throughout Mr. Moynihan's time there. The bank said in a March regulatory filing that its board is constantly evaluating potential CEO successors.
        Bank of America shares fell 1.5% Thursday, a steeper drop than the declines at J.P. Morgan Chase & Co., Citigroup Inc. and Wells Fargo & Co.
        The management shake-up came one week after the bank announced its first revenue gain in six quarters, building up investor hope that a long-awaited profit boom will soon follow. The second-largest U.S. bank by assets is also spending $100 million to resubmit a crucial stress test that the Federal Reserve has said needed more work. Two of the top executives in that effort: Mr. Thompson and Terry Laughlin, 60 years old, who will run wealth management after the departure of Mr. Darnell, who is 62.
        Mr. Thompson, 51, told Mr. Moynihan after last week's earnings announcement that he was ready to leave the role, according to people familiar with the situation. Mr. Moynihan, 55, wanted Mr. Thompson to consider staying, but Mr. Moynihan agreed that there wasn't a path to a role he would be interested in, such as running the investment bank, according to these people.
        That job is currently held by Mr. Montag, 58, who came from Merrill Lynch & Co. when Bank of America acquired the New York firm during the financial crisis. Mr. Montag, who had spent the bulk of his career at Goldman Sachs Group Inc., last year took on the job of sole chief operating officer at Bank of America and has remained a key executive even as many other top executives have left. Some analysts and investors now consider him the only credible internal candidate to succeed Mr. Moynihan, though others say the company could also look outside or wait for younger candidates to get more experience.
        In past years, earnings from businesses that Mr. Montag oversees helped offset the huge legal bills the bank racked up over its precrisis mortgage practices. This year, the two units earned a combined $4.56 billion in the first half, down 12% from the $5.15 billion they earned in the first half of 2014.
        Working against Mr. Thompson at Bank of America was the key role he played in three flubbed stress tests with the Federal Reserve, according to people familiar with the situation. The tests have become important milestones for big banks--the Fed decides whether banks can raise their dividends or buy back shares, both moves that can help share prices.
        Still, Mr. Thompson was viewed by many shareholders as an important spokesman for the company's strategy. "Brian tends to be more conservative and reserved in his comments--he's more of a lawyer," FBR Capital Markets analyst Paul Miller said of Mr. Moynihan, who started his career in law. "Bruce tended to give you more of a straight-up answer."
        Despite the stress-test issues, Mr. Thompson was considered by many analysts someone who could take over for Mr. Moynihan or Mr. Montag if necessary, at least on an interim basis.
        Mr. Thompson, who often arrives at his office at 6 a.m., had once been considered part of Mr. Moynihan's inner circle. Just after Mr. Moynihan became CEO, he plucked Mr. Thompson from the investment bank for the role of chief risk officer.
        But their relationship had deteriorated in recent months, according to people familiar with the situation. Earlier this year, when the bank moved Mr. Donofrio from the corporate bank to be finance chief of the consumer bank and wealth management, reporting to Mr. Thompson, it wasn't Mr. Thompson's choice, according to these people. Mr. Thompson also felt like he shouldered more of the blame for the stress-test flubs than other executives close to the process, say people familiar with his thinking. And one of Mr. Thompson's allies at the bank, Chief Accounting Officer Neil Cotty, announced earlier this year that he is retiring.
        The bank is preparing to resubmit its stress-test plan to the Federal Reserve by the end of September. Mr. Donofrio is to take over the CFO job next week, though the bank says Mr. Thompson will stay on until the end of the year to help with a transition.
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        (END) Dow Jones Newswires

        July 23, 2015 19:37 ET (23:37 GMT)

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