David C. Darnell, head of commercial banking, will now serve as co-chief operating officer for wealth management and other businesses directly affecting individual investors, according to the company. The press statement said that Darnell will oversee operations that include deposit, card, home mortgage, wealth management, small business, and related products and services.
In addition to Darnell, Thomas K. Montag was also named co-chief operating officer to oversee BofA's banking and markets activities, which includes middle market commercial and large corporate banking, institutional investor services, such as Bank of America Merrill Lynch Global Research, and the global markets sales and trading businesses, the release stated. Press reports speculate that Montag may be in line for the top spot to replace Bank of America Chief Executive Brian Moynihan.
The September 6th announcement by Moynihan to shake up the firm's leadership ranks comes just as the nation's largest bank by assets continues to work through its 2008 merger with brokerage giant Merrill Lynch and on the heels of a $5 billion investment from Warren Buffett's Berkshire Hathaway. BofA's stock price closed at $6.99 the day of the announcement of the management changes and was up to $7.13 shortly after the opening bell on September 7. Still, overall BofA's stock price has been hit hard since its 52-week high of $15.31 on January 14, a 48% drop.
Moynihan also announced that along with Krawcheck, Joe Price, president of Global Consumer and Small Business Banking, would also be leaving the bank.
Krawcheck's departure comes just two years after she joined Charlotte, N.C.-based Bank of America in 2009 following executive roles at Citigroup and Sanford Bernstein. Despite a spate of bad news that has battered Bank of America in the last month, from mortgage woes to a sinking stock price, its Merrill Lynch wealth management business has continued to perform.
That led to some speculation that Bank of America could look to sell the Merrill Lynch business. But the September 6th move may reaffirm Bank of America's commitment to Merrill Lynch, says Alois Pirker, research director at Boston-based financial services research firm Aite Group. "I think BofA has made the decision to hold onto Merrill, and if it takes a leadership change, then so be it," Pirker says.
Krawcheck's departure from Bank of America might actually signal more of a difference in opinion on direction, Pirker says, rather than a change in direction for the wealth management business.
The new leadership should streamline Bank of America's leadership and usher in a new regime under Moynihan, Chip Roame, managing partner of financial services consulting firm Tiburon Strategic Advisors said via email. "I love the moves. It's a far more simple organizational chart. It's far more client focused. It's far fewer levels," Roame wrote. "[Bank of America] was a top-heavy organization after so many mergers."
In fact, Moynihan had stated in the release that, "de-layering and simplifying at the scale in which we operate requires difficult decisions." He added in that press statement: "Sallie has led the wealth management businesses through an important integration with the broader franchise."
The changes are all a part of the first phase of "Project New BAC," which began in April 2011. Phase II will begin in October and conclude in March 2012, the release stated.
While some industry observers praise Moynihan's move, it could be more difficult to win over Merrill Lynch's financial advisor ranks after a month of challenges for the firm, according to several headhunters.
The shake-up could be seen as more bad news with the departure of a key executive, says Danny Sarch, president of White Plains, N.Y.-based financial services recruiting firm Leitner Sarch Consultants. "I find it fascinating that everybody says that the Merrill Lynch part of the firm has been propping the firm up and yet the woman who was running the Merrill Lynch part of the firm is the one" to leave, Sarch says.
Going forward, how the new leadership is perceived in relation to the bank versus the brokerage will also be important, says Los Angeles-based recruiter Bill Willis, president and chief executive of Willis Consulting. As recently as April, when the U.S. wealth management leadership slot was filled by John Thiel, who came up through Merrill Lynch, it was considered a nod to the firm's heritage. "I am not sure that there will be a lot of financial advisors who will be heartbroken over the news," Willis says of the end of Krawcheck's short term. "On the other hand, there may be some that are."