Wall Street is starting to place bets on BofA CEO – Business News
After Bank America’s first investor day in 14 years, CEO Brian Moynihan is privately declaring victory. For a change, he could have a level.
Yes, we’ve been powerful on Moynihan on these pages, declaring how he has shied away from taking calculated risk – a prerequisite for banking and finance – and leaving BofA shares to languish as an also-ran on Wall Street during his long tenure as CEO.
But based mostly on some numbers I’ve been crunching following his huge shindig two weeks in the past, Moynihan is proper to do some chest pounding – to date solely in personal – after he pitched the bank’s evolving business model to traders and analysts.
Wall Street sources mentioned traders preferred what they heard from Bank of America CEO Brian Moynihan, who not too long ago held an investor day for the primary time in 14 years. Jack Forbes / NY Post Design
Wall Street sources inform me traders preferred what they heard that day from a CEO who till possibly now, has by no means made the sale about why they need to maintain stock within the nation’s second-largest bank as opposed to shares of Jamie Dimon’s JPMorgan, the nation’s greatest bank.
True Dimon is thought of the world’s best banker for a lot of causes together with JPM stock price and his own voluble character. Moynihan, 66, has all the time been an odd slot in a business dominated by dealmakers and risk takers, like Dimon.
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His lawyerly temperament is one of warning. He cut his managerial enamel as normal counsel of Fleet Boston, which was among the many multitude of acquisitions that led to the creation of the trendy BofA. He took over as CEO in 2010 after the financial disaster practically brought on BofA to collapse.
He did a good job pulling BofA off the mat (its shares traded as low as $3), attracting investor money from the likes of Warren Buffett and scaling back risk. His drawback, critics say, is that he by no means developed the bank’s business model. It’s the explanation why BofA shares have lagged JPMorgan and all of the Big 6 banks.
Investor day was supposed to mark a shift, with Moynihan and a slew of prime executives explaining how the bank is now devoted to producing “responsible growth,” which means it’s risk-on at BofA – albeit within Moynihanian limits.
Moynihan has all the time been an odd slot in a business dominated by dealmakers and risk takers, like JPMorgan’s Jamie Dimon. Getty Images for America Business Forum
As of press time, it appears to have labored. Shares are down because the Nov. 5 presentation, however not as a lot because the markets (correcting due to tech fears) and, more importantly, Moynihan’s key rivals JPMorgan, Citigroup and Wells Fargo.
Since then, 20 analysts have raised their price targets on BofA shares. I’m informed that Morgan Stanley lists its stock as its prime huge bank choose with a price goal of $70; it’s at the moment trading round $50 a share.
We weren’t alone tweaking Moynihan as his stock fell round 2% during the festivities. But after the market closed, one thing attention-grabbing occurred: While the CEO was on stage answering questions with the executives slated to take his job when he retires in a few years – CFO Alastair Borthwick, Jim DeMare, head of world markets and Dean Athanasia, head of regional banking – shares started to rise in after-hours trading, largely recovering their losses for the day.
Moynihan’s drawback, critics say, is that he by no means developed the bank’s business model. REUTERS
“We appreciate the positive reaction from investors,” a Bofa spokesman tells On The Money. The day gave our management group a probability to comprehensively inform the story of our franchise, how we’re growing every of our companies, and the alternatives for growth sooner or later.”
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Of course you possibly can’t erase more than a decade of malaise with only one investor day. If Moynihan’s plan doesn’t lead to higher earnings growth, if it fails to meet its all important “return on tangible equity ratio” objective (bank analysts use this quantity for assessing efficiency) of 18%, and if it doesn’t improve its stock price, Moynihan’s deliberate retirement in 5 years is perhaps expedited.
If the progress of the previous two weeks is sustained, who is aware of? He would possibly keep longer.
