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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