This Is Banking Leadership? Moynihan's "Strategy" for BofA

Yesterday's Wall Street Journal covered BofA Brian Moynihan's earth-shaking new strategy for the financial utility. According to the article, Moynihan's brilliant conception,

"revolves around cross-selling to customers, companies and institutional investors who interact with the retail, corporate and wealth-management parts of the bank."

Wow! Deep, stunning stuff, isn't it?

In fairness to Moynihan, in about nine months he's been able to at least articulate one of money center banking's oldest standby strategies, which is considerably more than the hapless Vik Pandit of Citigroup has ever managed.

In admitting his stroke of genius "is just hard work," and nothing fancy, I think Moynihan has made a good case for his current $800K cash compensation to be substantially reduced in this and future years.

While the Journal piece quotes a typical analyst claiming that BofA is poised for juicy growth and returns due to its having banking relationships with half of the households in America, and any economic uplift will propel it to stellar performance, I'm not so sure.

We are in an era of financial utilities. The era of reckless growth of large commercial banks, at any price, and risk, is apparently over. With little ability to pump the few growing subsectors of finance while ignoring risks, it's unlikely that banking has the same future potential for consistently superior total returns that some members of the sector experienced in the past decades.

When regulators and new laws have proscribed so much of behaviors which led to unsustained growth of financial institutions in past years, it's hard to see how that growth will continue in the future.

Frankly, you could put a mediocre manager in terms of any of the three remaining US money centers- Chase, Citigroup or BofA- and, for that matter, Wells Fargo, too, and probably not notice any difference from current management.

Moynihan's choice of the retread approach of cross-selling and efficient operations have never actually provided any financial institution with consistently superior total returns in the past. Every institution which tried them, including James Robinson's American Express and Sandy Weill's Citigroup, failed miserably and expensively.

Moynihan's appointment as BofA CEO, and subsequent recycling of the oldest, dullest "strategies" in commercial banking, illustrates the bankruptcy of ideas in the sector, the lack of alternatives, and the reliance on old, failed approaches.

Too bad none of the nation's four largest bank CEOs, and their managements, can admit that US commercial banking just isn't, and shouldn't be, a high-growth sector anymore. Such growth doesn't come without risk, and, as protected, publicly-insured institutions, it's inappropriate for them to attempt such growth any longer.