Embattled Bank of America Corp. shook up its management ranks on Tuesday, announcing that two key officers will leave and promoting two others to share the chief operating officer role.
It's the latest effort by Brian Moynihan, the CEO since early 2010, to turn around a company that was once an industry stalwart but is still struggling under the weight of toxic mortgage loans. He took over the bank after predecessor Ken Lewis stepped down amid controversy over his purchase of Merrill Lynch.
Among the changes announced late Tuesday:
- Sallie Krawcheck, head of global wealth and investment management, is leaving. A Citigroup veteran, she was hired in late 2009 toward the end of Lewis' tenure.
- Joe Price, president of the consumer bank, will also leave. He was the chief financial officer under Lewis. Moynihan moved him to run the retail bank, Moynihan's old job, in 2010, and Moynihan at the time said the change represented his confidence in Price.
- David Darnell, a longtime Bank of America veteran who was elevated to the top ranks by Lewis, will become co-chief operating officer. He will share the newly created position with Tom Montag, who joined Bank of America when it bought his employer, Merrill Lynch, in early 2009.
Darnell, previously the president of commercial banking, will be responsible for consumer-targeted units including mortgages, wealth management and small business.
Montag, previously the president of global banking and markets, will be responsible for the business units that serve companies and institutional investors, including commercial banking, the trading businesses, and Bank of America Merrill Lynch Global Research.
The changes mark one of Moynihan's most dramatic moves to reshape the bank. Analysts wondered how investors would react when the market opens Wednesday — whether they'll view the shakeup as part of a reasoned turnaround plan or the result of a power struggle.
Krawcheck's division, which included private banking and the financial advisers who focused on serving wealthy individuals, had been doing well. It increased net income by 54 percent in the second quarter, to $506 million from $329 million.
Banking consultant Bert Ely said he wondered if the changes were driven by Warren Buffett, who announced Aug. 25 that he would invest $5 billion in the bank. He also received options to buy Bank of America stock at $7.14 per share, options which were under water at the close of business Tuesday, when shares were at $6.99.
'I cannot imagine that Buffett is in Omaha just sitting idly by," Ely said.
Moynihan said in a statement that he wished both of them well, and he portrayed their departures as a means of removing a layer of management in order to cut costs. "De-layering and simplifying at the scale in which we operate requires difficult decisions," Moynihan said in a statement.
Moynihan also described the moves as a way to streamline the bank's operating units to serve its key customer groups: individuals, companies and institutional investors.
The reorganization is effective immediately, and Moynihan called the changes "a significant step in the continued transformation of our company," which has also included at least 6,000 job cuts announced this year out of a workforce of 288,000.
Since the spring, Moynihan has been spearheading a cost-cutting program called New BAC. He said Tuesday that the second phase of New BAC will begin next month and run through March.
Bank of America's shares fell 3.6 percent Tuesday to $6.99. But they rose 2 cents in after-hours trading after the management announcement was made.
Though other banks have suffered, Bank of America has been especially vulnerable. Lewis' 2008 purchase of Countrywide Financial Corp., a mortgage lender known for exotic loans, made the bank a major player in the mortgage market but has also brought quarterly losses and regulatory probes.
After years of gobbling up other companies, Bank of America under Moynihan has been shrinking, laying off workers and selling units, including international credit card businesses and half of the company's stake in China Construction Bank. Moynihan has previously described his decisions as part of a multi-year transformation that might be painful in the short term but will ensure the bank's health in the long term.
Though Moynihan inherited many of his problems, he has also been criticized for a few stumbles, including underestimating how much the bank might have to pay for settlements related to mortgage-backed securities that went bad.