NEW YORK (Reuters) - Tom Montag made an unusually savvy career move when he joined Merrill Lynch in May 2008, shortly before the investment bank came to the brink of failure.
Had he stayed at Goldman Sachs Group Inc, (GS.N) where he co-headed its global securities business, his career might have advanced, but it could have only taken so many steps forward given how little turnover the most powerful investment bank has experienced in its upper ranks.
By casting his lot with Merrill Lynch, Montag instead ended up heading half of Bank of America — the profitable half. The Charlotte, North Carolina-based bank took over Merrill Lynch in 2009 after a deal forged at the peak of the financial crisis.
On Tuesday, Bank of America Chief Executive Brian Moynihan elevated 54-year-old Montag to head the bank’s entire corporate and institutional banking operation, as co-chief operating officer. Some on Wall Street view Montag’s promotion as a prelude to his leading the entire company one day.
Montag shares his new title with David Darnell, who oversees retail businesses like wealth management and branch banking. Between the two co-COOs, Montag may have gotten the better deal. He is now in charge of businesses that contributed about 43 percent of the bank’s overall revenue but were far more profitable than the segments Darnell oversees.
While BofA has lost $16.6 billion since June 2010, its trading, investment banking and commercial banking businesses have earned $9.8 billion.
Those who know Montag from his 22 years at Goldman and his shorter stint at the combined BofA-Merrill describe him as a natural leader with a sharp wit, a keen understanding of the markets and plenty of people skills.
“People love to work for him and love to work with him,” said Jon Corzine, MF Global’s MF.N chief executive and a former head of Goldman who worked with Montag in the 1980s and 1990s. “He’s a big, friendly guy at a human level. He’s tough as nails as a business person.”
Should Moynihan step aside as CEO of Bank of America, Montag could be a prime candidate to step in, multiple analysts and investors have said.
“Moving him to this job is a strong vote of confidence in Montag,” said Anton Schutz, president of Mendon Capital, which owns Bank of America shares.
Former Goldman colleagues say that Montag can come off as intimidating at first: He is built like a football player, with a square jaw and a husky, 6-foot, two-inch tall frame that has slimmed down considerably since he started at Goldman. He has a quick wit and can be brutally direct, but he was also well-liked and highly respected on the trading floor.
“He was a good guy: Tough, very smart, and with excellent commercial instincts,” said Peter Bouyoucos, who worked with Montag from 1986 to 1994 when he sold interest-rate products to financial institutions. “I always felt he was one of the smarter of my colleagues at Goldman.”
Bank of America needs all the smart people it can get. Its shares have dropped nearly 50 percent this year, and the bank is groaning under the weight of mortgage losses and ligation . The company needs to generate some $50 billion of capital in the coming years to meet new global requirements.
Management has said it can easily overcome that hurdle by selling assets and generating earnings, but some analysts and investors are skeptical.
As CEO Moynihan wrestles with the mortgage mess and other problems, one thing he will not likely have to worry about is the institutional side of the business, people familiar with the bank said.
“Tom is a powerful guy,” said one person who declined to be named to avoid hurting his relationship with either executive. “I think Brian needs him. He needs a guy who’s forceful, who can manage and lead, who’s got strong leadership skills, and I think Tom has demonstrated that.”
Corzine said he’s seen Montag at airports for overnight flights to Europe or Asia three times in the last 15 months.
“It speaks of a guy who is putting in the effort to get to the results,” Corzine said.
Montag has no professional experience in Bank of America’s bread-and-butter consumer banking business. He is a trader at heart, who spent significant portions of his career in the derivatives market.
He headed Goldman’s interest-rate swaps desk in the 1990s, built out its trading business in Japan in the 2000s and came back to New York to oversee its global securities business just as the market for exotic derivatives was peaking.
Outside of Wall Street, Montag is probably best known for a profane email regarding a collateralized debt obligation Goldman used to reduce its exposure to subprime mortgages as the home loan market started tanking.
The email — in which Montag refers to a CDO Goldman sold its clients as “one shitty deal” — was made infamous by Senator Carl Levin during a tense congressional hearing in April 2010.
But a closer look at the email chains released by Levin shows Montag paying close attention to Goldman’s trading book during a time of market crisis, questioning positions, offering blunt critiques to traders whose work he felt was inadequate, and liaising with top executives, including Lloyd Blankfein, who were worried about the company’s subprime exposure.
In February 2007, he asked Dan Sparks, then head of Goldman’s mortgage division, “cdo squared — how big and how dangerous(?)”
Montag has been paid well for his talent.
John Thain, the Merrill Lynch chief executive who wooed Montag to his bank in 2008, made up for the unvested stock Montag was leaving behind by granting him Merrill shares that were then worth $50 million, according to a regulatory filing.
Even though the stock is worth much less now, its vesting has pushed Montag’s overall pay package above Moynihan’s the past two years. Regulatory filings indicate Montag took home $29.9 million and $14.3 million in 2009 and 2010, respectively. He also received a $50,000 bump in his base salary for 2011, to $850,000, while Moynihan’s remained the same at $950,000.
Montag lives with his wife and three children at a townhouse he bought in 2008 on Manhattan’s Upper East Side neighborhood. The property was listed at $38 million, according to the New York Observer.
Additional reporting by Joe Rauch in Charlotte, North Carolina, and Dan Wilchins in New York; Editing by Steve Orlofsky