Bank of America CEO Brian Moynihan conceded Wednesday that the company made a series of missteps during the credit crisis and recession that hurt its relationship with shareholders and customers.
"Before and during the recent crisis, many of our collective business judgments missed the mark," Moynihan said in an annual letter to shareholders that was posted on the company's Web site. The bank is making changes, he adds, that will put it in a better position to avoid such missteps in the future.
Those changes include improving customer relationships and the bank's compensation structure.
Moynihan succeeded Ken Lewis as CEO of the Charlotte, N.C.-based bank on Jan. 1. Lewis stepped down after almost a year of strife that followed the bank's purchase of Merrill Lynch & Co.
Bank of America Corp., one of the banks hardest hit by the credit crisis and recession, received $25 billion from the government's Troubled Asset Relief Program in late 2008. It received another $20 billion shortly after it acquired Merrill Lynch in January 2009 in what would become a sharply criticized deal. Bank of America repaid the $45 billion in December.
Government support of Bank of America and the industry "carried a heavy cost for our shareholders," Moynihan said.
The company's stock fell to $3.16 in March 2009 from the mid-$30 range a year earlier. It closed at $17.27 Wednesday.
Moynihan also said that early in the financial crisis, "it became clear that consumers across all our markets were frustrated with their banking experience."
The bank is working toward repairing customer relations with easier-to-understand statements and policies, and has simplified some fees, he said.
In 2009, the bank set aside $49 billion to cover current and future loan losses. Moynihan noted that net charge-offs, or loans written off as unpaid, fell in the fourth quarter, and wrote, "we think the economy will gain strength through the year, so we expect credit costs to improve." That statement reiterated comments the bank has made when it released quarterly earnings reports.
The bank, like many other financial institutions, has also made changes to its compensation practices. While Bank of America has always had a "pay for performance" culture, Moynihan said the bank is making sure its compensation practices "more closely align pay with long-term financial performance."
Executive pay across the banking industry has been sharply criticized because banks needed to be bailed out by taxpayers after having contributed heavily to the credit crisis and recession with risky lending and trading practices. Bank of America came under particularly harsh criticism after it was learned that Merrill Lynch executives were awarded big bonuses just before the deal with Bank of America was closed. Those bonuses were given out even though Merrill Lynch had suffered much heavier than expected losses during the credit crisis.
However, former CEO Lewis received a compensation package valued at $32,171 in 2009, a year that the bank struggled with loan losses and repaid its federal bailout money, according to an Associated Press analysis of a regulatory filing disclosed by the bank. Lewis' 2008 compensation was valued at $9 million.
Lewis received no salary or bonus last year. His compensation was limited to perks including tax services, home security and parking, according to the recent filing.
The bank's annual meeting of shareholders is expected to take place on April 28.