ThainÆs departure was confirmed by BoA with one line in a reasonably lengthy press release announcing that Brian Moynihan, the firmÆs general counsel, had been named president of global banking and global wealth and investment management. ôMoynihan replaces John Thain, who is leaving the company,ö the release said, making no further mention of the circumstances surrounding his departure. It seems pretty clear that he has been pushed out, however.
Bank of America spokesman Scott Silvestri said in a statement quoted by Associated Press that BoA chairman and CEO Kenneth Lewis ôflew to New York (Thursday) to talk to John Thain. And it was mutually agreed that his situation was not working out and he would resign".
Only four months ago, Thain was hailed for his role as the instigator in the BoA-Merrill takeover and thus securing a future for the US investment bank on the very weekend that Lehman Brothers was forced into bankruptcy. His early moves to re-capitalise Merrill (which began immediately upon his joining the bank in December 2007) and to reduce its balance sheet exposure to toxic assets during the course of last year were also welcomed by investors.
Since then, however, Thain has gradually fallen out of favour with the BoA leadership and its investor base û to the extent that he was starting to become a liability. This came following a series of ill-advised moves, including his insistence on increasing his $10 million bonus for 2008 even as Merrill was racking up huge losses. (He eventually abandoned his request in December after a public battle).
But more damaging still, Thain also decided to pay bonuses to the rest of the Merrill staff in late December, earlier than usual and just before the completion of the merger with BoA on January 1. These bonuses look particularly bad since Merrill subsequently reported a $15.3 billion pre-merger loss for the fourth quarter, forcing BoA to seek a second capital injection of $20 billion from the US government last week. BoA, which had already received $25 billion from the government, reported a $1.79 billion loss from its own operations in the fourth quarter.
A former chairman and CEO of the New York Stock Exchange and president and COO of Goldman Sachs, Thain has also taken some blame for a series of top-level resignations of former Merrill staff just before the completion of the merger. Among them were Greg Fleming, who was to become head of corporate and investment banking globally on January 1, and Bob McCann, Merrill's brokerage head in the US û both of whom were highly regarded and considered valuable assets to the merged BoA-Merrill business.
The fourth quarter losses at Merrill, which were reportedly much larger than BoA anticipated when it agreed to the $50 billion takeover in September, and the need for a second government injection, has put huge pressure on BoAÆs share price. Before the start of yesterdayÆs trading it had already lost 52% this year. The stock fell another 14.5% yesterday.
By the time the deal was completed, the cost of the Merrill acquisition had dropped to $19.4 billion on account of the wide-spread sell-off in global equity markets in the fourth quarter and the fact that it was an all-share deal.
In addition to his new role, Moynihan will stay on as general counsel while the company searches for his replacement. Before the merger with Merrill Lynch, Moynihan ran BoAÆs global corporate and investment banking division, and before that he was president of global wealth and investment management at the company.
"Brian Moynihan is a strong manager and one of those people who can effectively envision strategy and execute," the press release quoted Lewis as saying. "He has excelled at everything we have asked him to do." By contrast, Lewis made no mention of ThainÆs contribution at all. He did emphasise, though, that the change in leadership in no way reflects a significant change in direction for the global banking or wealth management units.
BoA also said that Tom Montag will continue to run global markets and will now report directly to Lewis. Montag will also become a member of the management executive team, which sets strategy for the company.
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