RadioBDC Logo
Sail | Awolnation Listen Live
Steven Syre

Thinking smaller

By Steven Syre
Globe Columnist / September 9, 2011

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Your article has been sent.

Text size +

Boil down Brian Moynihan’s broad strategy for struggling Bank of America Corp. to just a few words and you might get this: Less is more.

That’s less as in less complicated. Less as in smaller. Less as in less risky. The point is to make Bank of America more stable, more reliable, easier to manage, and more predictably profitable.

Moynihan, the chief executive from Wellesley, has been streamlining Bank of America one small piece at a time since he took over the top job last year. He’s jettisoned 23 business units in the past year and a half.

Now bank watchers from Washington to Wall Street and beyond are anxiously waiting to see plans coming out of a broad restructuring effort known internally as Project New BAC.

They’re anxious for good reasons. Bank of America remains the country’s most worrisome financial institution because it’s so big and continues to face some serious problems beyond its control (a stalled national economy) or that appear to be a bottomless money pit (the subprime mortgage mess it acquired along with Countrywide Financial Corp.).

Bank of America shares have lost 45 percent of their value so far this year, worse than all but one of the nation’s big-bank stocks.

Many of the bank’s restructuring details remain to be seen but a few important elements are clear now.

The plan will include big job cuts, perhaps eliminating more than 30,000 positions - or roughly 10 percent of the workforce. Bank of America talked earlier this year about closing hundreds of branches. Other substantial cuts are likely in operational, back-shop departments, and the company’s mortgage functions.

A reorganization that divides Bank of America’s big corporate and institutional business from its retail and small business banking was rolled out this week, along with a top-level management shake-up.

Expect more streamlining along those lines. “What’s ahead is aggressive selling of noncore assets to continue to generate capital, increase our focus and lower risk,’’ Moynihan said in a conference call with money manger Bruce Berkowitz and his shareholders last month.

Here’s what is not in Bank of America’s plans: a spin-out of its Merrill Lynch brokerage subsidiary or a move to isolate its Countrywide mortgage unit and put it into bankruptcy.

For all the initial angst (and litigation) over the bank’s purchase of Merrill, the business has been a huge money-maker for its parent since the acquisition. But the Bank of America reorganization plan further integrates Merrill into the banking business rather than setting it apart for a possible spin-off.

Managing Countrywide, the financial disaster the bank acquired in 2008, is another matter. The business has spawned a long list of legal claims by government authorities and private parties that will take many billions of dollars to eventually settle. There is no simple or quick way for Bank of America to climb out of that hole.

It’s not unusual for banks to reevaluate their operations and cut overhead when weak economic conditions make it hard for financial institutions to grow. Surely Moynihan, a former Fleet Financial Group executive, recalls Fleet Focus, the exceptionally aggressive cost-cutting campaign from the early 1990s.

But a campaign to simplify, sell off businesses, and embrace the idea that smaller can be better runs contrary to every fiber of corporate ethos that defined Bank of America as it grew to become a financial giant. Getting bigger - every day if possible - was the point of going to work at the bank each morning.

Those days are gone.

The future for Moynihan and the bank itself depend a great deal on that new, more modest focus.

Steven Syre is a Globe columnist. He can be reached at