Bank of America (NYSE: BAC) CEO Brian Moynihan has no credibility left on Wall St. That makes his comments that the financial firm’s balance sheet has improved hard to believe. Skepticism will continue to show itself in the bank’s share price.
Moynihan told an investor conference, “We continue to position ourselves and make sure we are in good shape to last through anything we see ahead.” New bank stress tests conducted by the Federal Reserve early next year likely will show that is not true. The tests will be based on a model that includes a credit crisis event like that of 2008, as well as an economy that produces unemployment of 13%.
Bank of America has not stopped its effort to shed assets or cut costs, but the actions have done nothing to improve core problems. The firm’s trouble with its mortgage portfolio continues. Its investment bank still produces poor results. Management cannot seem to decide what businesses it should be in, and which it should not. Bank of America said it would cut 30,000 jobs to exit noncore operations. More layoffs are likely, management says. But the “downsizing” of the bank is not based on any blueprint available to investors.
Bank of America shares trade at $5.78, which is down from a 52-week high of $15.31. The stock price has dropped 57% so far this year. That is much more than the shares of peers Citigroup (NYSE: C), JPMorgan (NYSE: JPM) and Wells Fargo (NYSE: WFC).
Moynihan continues to overpromise and underdeliver. That will not last long. His job has been on the line for several months. He would do best to stay out of the public eye and actually improve the financial firm’s prospects.
Douglas A. McIntyre