When Bank of America chief executive Brian Moynihan reshuffled his executive team in September, it was in part to reorganise his bench to accommodate the shift of chief financial officer Paul Donofrio to be head of sustainable finance, and the retirements of chief operating officer Tom Montag and vice-chair Anne Finucane.
But it was also aimed at putting the bank on track to deliver a more integrated approach to its product and client spectrum.
The continuum approach that it takes to banking corporates, all the way from its business banking clients with revenues from $5 million to its corporate and investment banking clients with revenues in the billions, is one example of that. It mirrors its portfolio approach to product, with the objective of doing anything that a client might want. The bank argues it has global expertise and local delivery.
In a presentation in September, former global commercial banking president Alastair Borthwick, now taking over from Donofrio in the CFO seat, summed it up: “We’re good at a series of things, and we can deliver that to our clients everywhere.”
It’s good talk, but growth is the challenge when the offering is broad rather than focused. And it’s even more of a challenge when clients remain wary of new adventures.
Something that is not unique to BofA right now is that despite low interest rates, clients in some areas are simply not borrowing enough money. Revolver use is down in the post-pandemic world, and while BofA reckons this will change as the recovery picks up, there is not much it can do to make that happen. Revolver use stood at 28% at the end of June 2021, down from 35% at the end of 2019.
What it can do, however, is target organic loan growth by capturing more clients. The challenge for BofA is to do that while staying true to its long-held mantra of responsible growth.
Borthwick thinks that the bank’s performance through Covid, with a decent improvement in asset quality in 2021, is evidence that it is managing that well.
“Responsible growth isn’t just a buzzword for us,” he says. “It’s a strategy all the way through the company.”
He thinks the bank can pursue a strategy of loan growth without comprising risk appetite.
Responsible growth isn’t just a buzzword for us. It’s a strategy all the way through the company
Alastair Borthwick
The bank sees opportunities to grow in other ways too. It makes much of its global transaction services (GTS) franchise.
Borthwick notes that the value of payments through its business has been growing steadily over years – up 16% from 2018 to $387 billion in 2020, for instance. And it is on track to continue in 2021, with the bank spending much of its effort on pushing continued growth in digital adoption.
Perhaps BofA’s biggest opportunity – and the one most closely reflecting the integrated way it views its corporate client spectrum – is its effort to sell more of its investment banking product suite into its vast swathe of middle-market clients that are served by its commercial bank.
This is an ambition that it has had for a while but was given a renewed focus in recent years by Montag, who spoke in 2019 of the bank’s objective to improve the scope of its interactions with the mid-market.
Borthwick sees plenty of progress here already, particularly after the firm hired 385 new bankers in the last few years, helping to get its calls to prospects up to 82% from just 27% in 2014.
He thinks there is more to do, “but we’re beginning to get the proper size sales force”, he says.
Market efforts
That salesforce increase is part of the bank’s focus on better integrating its regional banking operations, a push also reflected in Moynihan’s reshuffle that saw regional banking president Dean Athanasia add global commercial banking and business banking to his remit as Borthwick moved into his CFO seat.
BofA posted record first-half investment banking fees of $4.4 billion in 2021, after a record full-year result of $7.2 billion in 2020. Market share has risen from 5.6% in 2018 to 6.4% in the first half of 2021. But its mid-market effort – covering firms with revenues of $50 million to $2 billion – is trending ahead of that, with a 265-basis-point rise in share from 2018 to 9% in 2020, when it ranked third. Its investment banking fees from commercial banking clients rose 41% over that time.
Moynihan’s hope will be that as his new structure beds in, BofA will be able to make good on the growth areas that it has long identified – and that a post-pandemic economic recovery will give it a tailwind.
Part of his challenge will be making a very flat structure work – some businesses that previously reported to Montag now report to Moynihan directly, for example. But if he can make a success of greater integration across the firm, it might see the bank finally deliver the potential of its extraordinary breadth.
