Bank of America’s Chief is the Captain of a Ship Becalmed

Just two weeks ago in a conference call with Wall Street analysts, Bruce Thompson, the chief financial officer of Bank of America, took a victory lap.

The bank, long troubled by expensive legal woes stemming from the mortgage crisis, appeared to have finally turned a corner as its quarterly earnings soared. Bank of America’s balance sheet, Mr. Thompson crowed, had “never been stronger.” That week, he played a round of golf with the chief executive, Brian T. Moynihan, in Charlotte, N.C., where the bank is based.

A few days later, Mr. Thompson was out.

Mr. Thompson’s move seemed strangely abrupt. But it had actually been in the works for some time. Banking regulators were told of his possible exit well in advance of last Wednesday’s announcement, people briefed on the matter said.

Still, the move stunned analysts and investors, who wondered what was going on at the top of the bank. Mr. Thompson’s was the most prominent of a series of moves in the executive suites. And that turnover had occurred at a time of tensions between the various parts of the bank. Former executives describe the relationships between Mr. Moynihan and some members of his leadership team as “strained.”

All this adds to the burden of Mr. Moynihan, who is increasingly coming under pressure to demonstrate his ability not only to lead the nation’s second-largest bank— a complex organization with $2.1 trillion in assets, clashing cultures, geographic silos and various power battles within — but also to expand it.

It’s a herculean task that he has struggled with.

Since Mr. Moynihan was named chief executive in late 2009, Bank of America’s stock performance has lagged the nation’s so-called mega-banks, including JPMorgan Chase, Citigroup and Wells Fargo.

Bank of America has taken more than $70 billion in charges — an amount nearly as big as the stock market value of U.S. Bancorp — to pay, for the most part, legal fines, settlements and penalties largely related to its consumer mortgage business. Last year, the bank faced an embarrassing $4 billion error in its books that caused regulators to delay a promised stock-buyback plan. Again, on this year’s stress test, Bank of America received only conditional approval because of concerns about weakness in internal controls around capital planning.

While executives at other banks were able to bolster profits more easily by shedding businesses and slashing costs, Mr. Moynihan, his defenders noted, was stuck managing the enormous financial and legal fallout brought on by two transformational mergers undertaken by his predecessor, Kenneth D. Lewis: the acquisitions of the mortgage lender Countrywide and the investment banking giant Merrill Lynch in 2008.

“I think Moynihan has done a reasonably good job of dealing with the legacy issues, but I don’t think he gets the same respect as some of his peers and my question is, Is he the right guy going forward?” asked Jonathan Finger, a partner at Houston-based Finger Interests, which owns about 900,000 shares of Bank of America.

Mr. Moynihan’s critics inside and outside the bank say he has struggled to articulate a clear strategic path to growth. The bank instead has relied too much, they say, on a potential increase in interest rates to bolster profits.

At the same time, there is no clear successor to Mr. Moynihan inside the bank. The most prominent — and possibly most powerful — top executive is the chief operating officer and head of the investment bank, Thomas K. Montag, who is not considered a likely candidate for the job unless he is asked to step in during an emergency.

In a phone interview from his offices in Boston, Mr. Moynihan said he had managed to cut expenses, bolster capital cushions and rebuild the brand of a company that had become the face of the nation’s foreclosure crisis and a punching bag for politicians seeking tougher regulation of Wall Street.

“No one took the amount of hits that we took,” Mr. Moynihan said. “No one had a deeper hole to get out of.”

A bank spokesman says it is more relevant to measure the company’s performance since 2012, which is when Mr. Moynihan’s strategy of simplifying the company and working through legal issues began to take hold. Over that three-year period, Bank of America’s shares have far outshone competitors’. The recent lag in the share price, the spokesman said, is only natural after its previous run-up.

But by other measures, Bank of America is still climbing out of a hole. Despite some one-time items that helped bolster profits in the second quarter, the bank’s revenue in certain key businesses has been declining faster than expenses. A barrage of new regulations has curbed the ability of banks to generate profits in nearly everything they do — from trading bonds to issuing credit cards.

While many banks face a similar predicament, Bank of America’s trials are compounded by Mr. Moynihan’s challenge of integrating a hodgepodge of businesses — and personalities — assembled largely in a time of crisis.

Moreover, they say, Mr. Moynihan, 55, has surrounded himself with a close-knit circle of loyal lieutenants — many from his days at the regional bank FleetBoston Financial, which was acquired by Bank of America in 2003.

At least five of the 13 members of Mr. Moynihan’s executive management team, including a co-head of consumer banking, its leader of global wealth and investment management, its corporate auditor and its head of global strategy, have ties to FleetBoston.

Among these close allies, insiders say, there is no obvious heir apparent — though one name that gets mentioned is Dean Athanasia, a co-head of consumer banking, who is 49 years old.

Mr. Moynihan said: “My guess is that whoever succeeds me is in their 40s today, not someone in their 50s.”

The departing C.F.O., Mr. Thompson, 50, was widely seen as the person in line to fill Mr. Moynihan’s shoes, but his star dimmed, people briefed on the matter said, after the bank miscalculated its capital levels by $4 billion last year.

Mr. Moynihan was angry at Mr. Thompson and his team for the mistake, people briefed on the matter said. He appointed a trusted former FleetBoston colleague to take over the bank’s preparation for its stress test submissions, a job that had been done by the C.F.O.

Mr. Moynihan brushes off any suggestions of strain among his leadership team, attributing any tensions to the natural frictions at a bank that has undergone a sea change over the last six years.

“We were never an international bank and now we are one,” Mr. Moynihan said. “We were not a major investment bank in global market activity and now we are one. On the consumer side, we had been a product company that relied too much on overdraft fees, and I ended that. There are all these cultures that needed to change.”

When he was first named chief executive, Mr. Moynihan seemed an unlikely choice to pull off that transformation.

Sometimes referred to as “the accidental C.E.O.,” Mr. Moynihan was initially heading out the door as a result of the Merrill Lynch acquisition. But he survived the merger and, later, when Mr. Lewis was ousted, landed on a very short list of potential C.E.O.s.

Named chief executive in late 2009, Mr. Moynihan is described as having a probing, scientific intellect and a knack for digging into financials and locating bad assets. A college rugby player and a lawyer by training, he had also earned the nickname “Mumbles” for his rapid speaking style that many said could be difficult to keep up with.

Mr. Moynihan typically starts the week in Boston (he did not want to uproot his children, who when he got the job were attending public school in a Boston suburb) and then flies either to the bank’s headquarters in Charlotte, N.C., or New York.

Several former Merrill Lynch executives said Mr. Moynihan was hardly ever seen visiting the trading floors of the bank’s soaring glass tower in Midtown Manhattan.

That has long been the territory of Mr. Moynihan’s powerful No. 2, Mr. Montag.

The highest-paid member of the bank’s management team, Mr. Montag operates the investment banking business, which has churned out strong profits in recent years from booms in high-yield markets and deal-making activity.

A former high school athlete, Mr. Montag had a meteoric career inside Goldman Sachs that spanned more than two decades. He ran Goldman’s derivatives business before becoming co-head of Goldman’s Japan operations, eventually returning to the United States to co-head the investment bank’s global securities business.

After being passed over to become the president of Goldman Sachs, Mr. Montag was lured to Merrill Lynch by another Goldman Sachs alumnus, John A. Thain.

Mr. Montag’s $39 million pay package initially irritated many Merrill Lynch traders and salesmen — they were staring at their Bloomberg screens that showed their own holdings in the investment bank disintegrating in the fall of 2008. Yet Mr. Montag managed to win over many of them.

“The guy can really rally up a room,” a former trader said.

While some said Mr. Montag, 58, harbored ambitions to lead Bank of America, others inside the bank said they did not believe he was ever a viable candidate. For instance, some said, it had been difficult for him to contain his frustration with sweeping new banking regulations, a reality for any bank chief.

Two former high-ranking bank executives said relations between Mr. Moynihan and Mr. Montag, who was named the bank’s sole chief operating officer last fall, had been strained.

Inside the bank, others dispute the idea that there are tensions between its top two leaders.

They note that Mr. Moynihan and Mr. Montag frequently travel the world together, meeting with investors and often winding up having a beer and ribbing one another about their college football teams. (Mr. Moynihan attended Brown and Notre Dame Law School and Mr. Montag graduated from Stanford.)

In a rare interview, Mr. Montag compared Mr. Moynihan to the current chief executive of Goldman, Lloyd C. Blankfein.

“One thing that Lloyd and Brian have in common is that they are both really smart,” Mr. Montag said. “I listen to really smart people.”

He credits Mr. Moynihan for articulating a consistent message about the need to simplify the business from a vast collection of consumer and investment banking units into a cohesive company.

Having been a partner at Goldman when the firm went public in 1999, Mr. Montag had already amassed a large nest egg when he joined the bank. He says he stays there because he likes the work, which he described as building a new model for an investment bank.

“I am fortunate to have the luxury and freedom to do what I want to do,” Mr. Montag added.

Still, Mr. Montag makes even more than his boss. In 2014, Mr. Montag was paid $14 million compared with Mr. Moynihan’s $13 million.

“He makes more money because that’s what I recommend to the board,” Mr. Moynihan said. “If it bothered me, I would change it.”

In a five-page memo to employees last week announcing a series of management changes, Mr. Montag was the first person Mr. Moynihan mentioned, even though his job was not changing.

It wasn’t until Page 3 that Mr. Moynihan announced that Mr. Thompson was stepping down as chief financial officer.

Mr. Moynihan said that after more than five years as chief risk officer and chief financial officer, Mr. Thompson was ready to do something new. People briefed on the matter said Mr. Thompson wanted a new job running a business, but there was no clear next step for him at the bank.

“I felt I never would leave the company when it was not in a good place,” Mr. Thompson said in an interview. “When you look where we came out in the second quarter, it was the most profitable quarter we have had since 2007.”

Still, his departure left investors perplexed. “I haven’t spoken to anyone who isn’t surprised,” said Mike Mayo, a CLSA banking analyst, who has a sell rating on the bank. “It’s a head-scratcher.”

People close to the bank, none of whom would speak on the record because they frequently interact with the two men, said the relationship between Mr. Montag and Mr. Thompson had been tense at times.

Mr. Montag said such suggestions were “nonsense,” while Mr. Thompson said he had a “good working relationship” with Mr. Montag.

Disagreements may be expected when a large retail bank marries a hard charging investment bank.

Mr. Moynihan says he encourages tensions between his top executives. As chief financial officer, Mr. Thompson had to put limits on how Mr. Montag and other executives could deploy the bank’s capital to generate returns.

“Those are natural tensions that I foster,” Mr. Moynihan said. “I want there to be a dialogue, and I decide how it all plays out.”