I rarely find that longtime banking analyst Dick Bove has much of interest to say. His buy ratings on large banks are often so short-term as to be encouraging retail investors to time their trading to quarters.
But this morning, Bove had several useful comments regarding BofA CEO Brian Moynihan's so-called Tuesday afternoon massacre, in which Sally Crawchuck and Joe Price, both consumer senior executives, were fired. Two institutional banking executives were elevated in rank.
Bove sees the moves as reasonable reactions to Dodd-Frank, which has made consumer banking more difficult and less profitable. He further forecast 600 branch closures and 30,000 employees shed on the consumer side of BofA in the next two years, as the bank shifts resources from consumer to institutional businesses.
That makes sense.
But perhaps the shrewdest insight Bove made was one worthy of my old boss, Gerry Weiss, of Chase Manhattan Bank. By reshuffling senior executives, Moynihan, in Bove's opinion, bought himself several years time as CEO.
It's an old trick, yet, still works. A struggling CEO, rather than wait for the board to fire him, moves first and rearranges the deck chairs himself. This allows him to do three things: blame the fired execs for problems, claim to be (and look) forceful in making the changes, then, most importantly, use the new appointments to buy himself time while the newly-promoted managers and organization structures pan out.
It should not surprise that CEOs using these maneuvers are typically the ones whose companies are in the most trouble. Here, Bove and I part company. I believe Bove, with Tom Brown, predictably, both reacted with even more praise for the large, stumbling bank.
I believe it signals just how troubled BofA actually is. Moynihan's had plenty of time to do this, and Dodd-Frank is a year old. Either he's slow- take that any way you wish- or he realized, with this summer's appalling collapse of BofA's stock price, that if he didn't act soon, he'd be out.
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Joe Price was the executive in charge of the Countrywide due diligence and merger. I'm surprised that he lasted this long.
Based on the Co-COOs, I wouldn't be surprised to see the bank split into two -- an investment bank and a commercial bank.
C has through several 'crises' in my lifetime (1975, 1981, 1992, 2008). BAC, alas, is going down the same road.
Crony capitalism created the entity that became BAC. Nationsbank was handed the valuable Texas banking franchise for a pittance with all the risk/losses going to the taxpayer. Earlier, they gained a foothold in FL through exploiting loopholes in banking laws.
Crony capitalism keeps these banks alive.
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