BofA settles for compromise candidate as new CEO

December 18, 2009

White smoke finally emanated from the chimneys of Bank of America headquarters. The conclave of directors at what should be America’s most profitable bank selected Brian Moynihan on Dec. 16 to succeed Ken Lewis as chief executive. That’s good news in one respect: it means the bank can break with the legacy of its current boss.

But while Moynihan has his charms, his anointment represents the compromise of a marginally functional board divided in its ambitions for the bank’s future. Though the former Bank of Boston executive was chosen unanimously, his ascension is more about peace-keeping than fresh thinking.

That may not be such a bad thing provided Moynihan can find a way to keep the house that Lewis built through badly botched acquisitions intact. And that will depend on the 50-year old leader’s ability to motivate executives who didn’t get the board’s nod to do the bank’s bidding.

In fairness, BofA is a hibernating leviathan of the banking firmament. While Lewis made a hash of his many purchases and alienated regulators, the additions of Merrill Lynch, Countrywide and Chicago’s LaSalle have made BofA the most formidable competitor in American banking.

Even with poor management, the bank should be in a position to trump JPMorgan as most profitable financial institution within a few years. But in the hands of an effective management team, BofA should generate more than $40 billion in profits a year.

To achieve that Moynihan will need help. In the short time that he ran Merrill he was unloved. His accession to the top has already kicked off consternation at the investment bank, and created an opportunity for, among others, Morgan Stanley boss James Gorman, and his new hire Greg Fleming — both former Merrill execs — to poach rainmakers.

So it will be incumbent upon Tom Montag, the former Goldman Sachs partner running Merrill, to keep the peace. But as a senior and credible candidate to run the bank himself, he will need some inducement. So, too, will Sallie Krawcheck, who oversees the Thundering Herd’s army of stock brokers.

That BofA’s board chose a leader committed to executing a strategy already laid out for him by his predecessor suggests it, too, understands this challenge.

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