August 9, 2011 / 5:50 PM / 7 years ago

Moynihan tells staff Bank of America on right path

* Moynihan says unsettling times for clients and staff

* CEO says bank taking aggressive action on legacy issues

* Reassures staff the bank will weather latest crisis

By Joseph A. Giannone

NEW YORK, Aug 9 (Reuters) - With Bank of America Corp (BAC.N) stock in freefall, Chief Executive Brian Moynihan moved to reassure employees that the big, bloodied bank was on the right path and could weather the current storm.

“We are aggressively taking action to put the legacy mortgage issues behind the company — even at great short-term cost — and to help get the U.S. housing market going again,” he said in a letter to the bank’s nearly 288,000 employees late on Monday. “We have weathered challenging times before and we will now.”

The largest commercial bank’s stock price sank 20 percent on Monday to its lowest level since the end of March 2009, a period when many investors were worried the U.S. government might nationalize BofA and other banks saddled under unwanted mortgage and credit assets.

Now Moynihan, besieged by a weak economy choppy markets and a stream of litigation and regulatory probes, is under the gun to keep clients and employees from fleeing the ship.

“This is an unsettling time — not just for our shareholders, but also for all of our teammates,” he wrote.

Moynihan said the bank’s capital ratios are much stronger than during the financial crisis of 2008, when the Charlotte commercial bank received a $45 billion bailout by the Treasury Department. Bank of America had been weakened by its 2008 takeover of mortgage giant Countrywide and its agreement to rescue hard-hit investment bank Merrill Lynch.

And with the exception of the residential mortgage business, which continues to get slammed by falling home prices and legal fallout stemming from the crisis, Bank of America’s businesses are all in the black, he said.

Stocks broadly have plunged in the past week, capped off by frenzied selling on Monday after Standard & Poor’s cut its rating on U.S. government debt to AA-plus.

On top of that, BofA was clobbered by news that insurer American International Group filed suit seeking $10 billion for losses on mortgage securities.

Moynihan said the bank’s capital ratios and excess cash are higher than they were a year ago, and that most of its legacy mortgage issues have been resolved. BofA has reserved $18 billion to settle outstanding mortgage-related issues.

    “Most of the factors driving market volatility are beyond our control,” he said, “but for matters within our control, we are taking action.”

    Moynihan’s letter is one part of a full-court press by Bank of America management to soothe customers and employees during these unsettled days.

    Bank of America wealth and investment management president, Sallie Krawcheck early on Monday taped a message of reassurance for the bank’s Merrill Lynch, U.S. Trust and retirement services advisers and employees.

    Krawcheck late on Friday had canceled a teleconference with the press, which had scheduled for Monday morning to discuss a quarterly survey of the views of affluent investors.

    “Sallie and those guys are so focused on advisers right now they don’t have time for the call,” a spokesman said.

    Moynihan will on Wednesday submit to a public grilling from hedge fund Fairholme Capital founder Bruce Berkowitz, one of the bank’s top shareholders. Fairholme set up the call and solicited questions from investors before BofA shares sank.

    In midday Tuesday trading, Bank of America shares rose 7 percent to $6.99 a share, about one-third its June 30 reported book value.

    Reporting by Joseph A. Giannone and Joe Rauch; editing by Gunna Dickson

    0 : 0
    • narrow-browser-and-phone
    • medium-browser-and-portrait-tablet
    • landscape-tablet
    • medium-wide-browser
    • wide-browser-and-larger
    • medium-browser-and-landscape-tablet
    • medium-wide-browser-and-larger
    • above-phone
    • portrait-tablet-and-above
    • above-portrait-tablet
    • landscape-tablet-and-above
    • landscape-tablet-and-medium-wide-browser
    • portrait-tablet-and-below
    • landscape-tablet-and-below