Thomas Montag has not just led the global banking and markets businesses at Bank of America, he has dominated them. He was a leading figure in the rebuilding of the bank after the great financial crisis, the acquisition of Merrill Lynch and the departure of former chief executive Ken Lewis, who was blamed for the losses that followed his final rushed takeover.
Montag turned the acquisition of Merrill Lynch, a firm he had joined to run sales and trading just weeks before its 2008 rescue, from disaster to success.
Yesterday’s press release announcing his retirement points out that in the first half of 2021 the businesses Montag runs – all those that serve companies and institutional investors and including BofA Global Research and the global markets sales and trading businesses – contributed 46% of Bank of America’s revenues, up from 36% in 2009.
Those numbers barely hint at the story.
In the maelstrom that swirled round the bank following its 2009 bailout, the newly arrived Montag was even considered as an outside candidate to be chief executive, before the younger Brian Moynihan, a lawyer by training who had been at Bank of America since its 2004 acquisition of Fleet Boston, got the job in 2010.
The two men came to their understanding. Moynihan built a culture defined by key catchphrases – all about teammates, responsible growth, making financial lives better.
He left Montag to run his businesses his way, in a much more traditional Wall Street style. If responsible growth was Moynihan’s phrase, “hard-driving” is the description that invariably attaches to Montag. And if he was always scrupulously polite towards the CEO, he was never a sycophant, rather always an independent thinker, highly intelligent and with an understanding of the banking business that is not common among those who built their careers and their fortunes trading fixed income and derivatives.
Bank of America was lucky that Merrill had come with a 22-year veteran of Goldman Sachs who had risen to co-head its global securities business.
Unlike Merrill, Goldman came through the financial crisis relatively unscathed, in large part thanks to its SecDB (securities database) system. First built inside J Aron to record each trade and each exposure to each counterparty in one place, this enabled traders to better price new business and risk managers to see aggregate exposures across the firm.
Bank of America was lucky that Merrill had come with a 22-year veteran of Goldman Sachs who had risen to co-head its global securities business
Montag set out to build an equivalent. It took many years and a big slice of Bank of America’s famously large annual IT budget to build Quartz; and even now insiders rarely talk about it.
Euromoney asked Montag just before its full rollout in 2018 whether customers would feel a difference when Quartz finally went live. “Not directly,” Montag told us. “But our finance department certainly will, and our risk department. And customers will be dealing with a bank even more confident that it is on top of all the risk and position data in real time.”
By then, the diversification of the global markets business and its tight risk control had already made it profitable on 98% of trading days in the previous five years. The global markets balance sheet went up: value at risk remained stable.
Big losses became oddities. When the bank lost $292 million in 2017 on a margin loan to South African billionaire Christo Wiese secured by shares in Steinhoff, which collapsed in value after disclosure of accounting irregularities, the bank retained an outside legal firm to investigate even though many large banks made the same mistake.
Though he dodged the bullet, this seemed to trigger a crisis of confidence in Montag’s side of the bank, at a moment when Bank of America looked capable of challenging JPMorgan at the very top of the investment banking league tables. There was a feeling that it might be passing up its chance to dominate. Some good bankers walked. Montag accepted that investment banking and trading revenues could not dominate the group.
Culture
Reports of his management style vary with how well bankers did under him. Montag came from a firm with a famous culture of young bankers being developed by the partners – rabbis, as they were known at Goldman Sachs – though some describe it not so much as mentoring but more a system of patronage where seniors favoured the juniors who made most money for them and demanded fanatical commitment.
Stories abound of Montag showing fierce loyalty to certain favourites.
For journalists, Montag was a tough man to get meetings with, perhaps due to his anger at frequent mentions in the press of his disparaging email remark about the Timberwolf CDO deal which Goldman structured and sold to clients before the financial crisis. There was always the danger when you did get to his office that half the time would vanish in talk about sports – Montag always delighted, eager, amused – before you got onto Quartz, Steinhoff, VAR, trading algos and the rest.
Investor clients loved meeting him. And although some say he spent less time with corporate clients, the bank’s corporate franchise grew market share strongly.
Not everyone will miss him. But Montag will be tough to replace
It seems odd that Bank of America has announced the retirement of the man running half the bank, also its chief operating officer and no doubt first in line to step up if Brian Moynihan suffered an accident, without explaining succession. This, it says, will be announced in the “coming weeks”.
Raul Anaya runs business banking serving mid-size US companies. Alastair Borthwick runs global commercial banking. Matthew Koder runs global corporate and investment banking. James DeMare heads global markets and also real estate lending. Sanaz Zaimi is global head of fixed income, currencies and commodities. Bruce Thompson is head of wholesale credit underwriting.
Does one of them step up? Do they all become direct reports to Brian Moynihan?
One read on Montag’s departure is that his time was simply up. While Moynihan had left him alone to run the integration of the old Merrill Lynch institutional business for several years, he and the rest of the Boston cadre at the top of the bank began to take a closer interest several years ago in global banking and markets. Things changed. Did they decide the patronage culture was past its sell-by date? Did Montag run out of patience with them?
Not everyone will miss him. But Montag will be tough to replace.
