The message came from one of Bank of America Corp’s (BofA) most powerful board members across large video screens: “We’re not going to do anything crazy to the customer — and we’re not going to do anything crazy for the customer.”
The declaration by Frank Bramble Sr. kicked off the firm’s shareholder meeting in April. It wasn’t just for public consumption: Inside the investment bank, risk-taking is being tamped down this year, according to senior executives and dealmakers.
The firm has become more selective when asked to advise potentially thorny deals, and it’s easing off certain overseas markets, they said. Some are grumbling, worried they’re missing chances to profit.
The caution partially stems from Bank of America’s massive losses on loans in the wake of the 2008 financial crisis and a desire to be ready when the credit cycle sours anew. Such concerns flared in December when the firm lost roughly $300 million on dealings tied to South African
furniture retailer Steinhoff International Holdings NV. The aversion to risk became visible in some pockets of first-quarter results and has since grown more pronounced in a number of league tables ranking Wall Street firms.
After reaching a record in 2017, Bank of America’s fees for advising on deals tumbled 27 percent in the first quarter from a year earlier, the steepest drop among big US banks. Since March, when an internal probe of the Steinhoff dealings wrapped up, the bank’s sales of emerging-market debt have declined by more than a third compared with a year earlier, even as the market for new bonds grew. The bank has lost more share than any peer in arranging new equity deals in Europe, the Middle East and Africa this year. And it recently fell behind JPMorgan Chase & Co. in offering leveraged loans in the US this year, a market it’s dominated since early 2009.
This account of the shifts inside Bank of America is drawn from interviews with more than a dozen senior executives and current and former bankers. Some said the firm’s reluctance to take risks has contributed to defections of dealmakers this year. All spoke on the condition of anonymity to avoid jeopardising their careers.
A Bank of America spokesman said departure rates have been normal and that the firm hasn’t had trouble attracting new talent.
More broadly, executives have repeatedly said they want to boost earnings without setting shareholders up for future losses.
“We are focussed on growth, the right way, and that is allowing us to grow and to help our clients succeed,” Christian Meissner, the firm’s corporate and investment banking chief, said in a statement emailed by a spokesman. “We are one of the global leaders in our field. Our pipeline remains robust and we continue to serve our clients globally.”
Bank of America’s leaders have reasons to be leery of risks. Chief Executive Officer Brian Moynihan has spent most of his eight years atop the firm shelling out billions of dollars to clean up fallout from the financial crisis.
In speeches to staff and the public since 2015, he’s vowed never to repeat such missteps, promising the bank will pursue “responsible growth.” Board members echoed the message in the video at the shareholders meeting.