News that Christian Meissner will leave Bank of America Merrill Lynch at the end of this year will not come as a surprise to those who follow the US firm closely.
Tensions between BAML’s global corporate and investment banking division, which Meissner ran, and the rest of the firm and its global leadership had been evident for some time. Those tensions revolved around a mixture of business performance, personalities and culture.
BAML’s investment banking performance over the past 18 months, especially in global M&A, has underwhelmed. The reasons cited for that underperformance depended on whom you spoke to in the firm. Some within GCIB put it down to a conservative approach to taking risk during an era of jumbo M&A; others outside the division questioned whether the firm had the right people in place to make the most of a large balance sheet run on what CEO Brian Moynihan and his senior management team would term risk-appropriate, rather than risk-averse.
As the head of one rival investment bank told Euromoney recently: “Although Bank of America has done well, it is possible that this period, when the other US banks are really pressing home the advantage as the Europeans retreat, will eventually be judged a missed opportunity. And I do wonder what it might achieve if it took that markets balance sheet up maybe towards $1 trillion.”
Christian Meissner, BAML
But, as Euromoney pointed out in a deep analysis of BofA’s overall strategy earlier this year: [Bank of America] simply won’t, partly because the bank does not want the wholesale side of the business, where investors judge earnings to be inherently more volatile and thus lower quality, to outweigh consumer.”
The tensions were highlighted in a Bloomberg article in June which insiders say provided a broadly-accurate assessment of the mood within BAML. The ill-feeling was a setback for Bank of America, which has spent a number of years building an increasingly global investment banking franchise that was at last looking like a real competitor to JPMorgan, Morgan Stanley and Goldman Sachs.
For some, that platform was an opportunity to kick on which the firm has not followed through on. Recent losses of close to $300 million suffered as a result of its margin lending to failed South African company Steinhoff exacerbated concern levels around risk and led to a period of blaming and finger-pointing.
As BofA’s lead independent director Jack Bovender told Euromoney in July: “We have a phrase in the south, maybe you have something similar in the UK, where a person gets taken to the woodshed. It means they get asked some fairly direct and tough questions. Management identified this matter for review to understand fully what happened and brought it to the board to discuss it in great detail.”
When the dust settles on their relationship, Bank of America executives will have good reason to thank Meissner for his tenure at the helm of its global corporate and investment bank. It’s easy to forget today the dysfunction of the early years of the Bank of America/Merrill Lynch combination.
Meissner, a smart, quietly spoken and unflappable Austrian proved to be the perfect leader to bring its corporate and investment bank together. He joined BAML after stints at Goldman Sachs and Lehman Brothers and, as Euromoney wrote in March 2017, “took apart its global corporate and investment bank and put it back together again”.
What Meissner will do next is unclear. He is highly respected by many competitors and has often been linked with investment banking chief executive roles in recent years, especially in Europe. But a different type of business, away from the big banks, might also appeal to someone with such broad and strong client relationships. He is unlikely to rush any decision.
Meissner will be succeeded by Matthew Koder, currently based in Hong Kong as president of Bank of America Merrill Lynch Asia-Pacific, at the end of this year.
Koder is a consummate professional with a strong track record in investment banking, and notably in capital markets. In a previous stint in Asia, he was the driving force behind UBS’s long-term dominance of the region’s equity capital markets league tables.
As Asia-Pacific president of BAML, he has made steady if unspectacular gains in most areas, including investment banking, capital markets and transaction banking, in line with CEO Moynihan’s mantra of “responsible growth.”
Matthew Koder, BAML
Koder is well-liked by colleagues, despite a reputation as a demanding boss. He is engaging as well as fiercely ambitious, with a ferocious attention to detail. Running one of BofA’s biggest global businesses, after overseeing a region, might put the Australian in line to be a potential successor to Moynihan in the future. His internationalist background may also refute suggestions suggestions that BofA would prefer to retreat to the US.
His task at BAML’s corporate and investment bank will be to bring a team of investment bankers together under a collective vision that matches their individual ambitions with the overall strategy of the group. Will BAML have another crack at JPMorgan’s leadership? Or will it be comfortable with a place at the top of the second tier of global firms, stronger in the higher-paying, higher-grade markets of the US?
He can be expected to follow Moynihan’s clear and consistent approach. As Moynihan said in July to Euromoney: “If dealing with our customers – doing the right business with the right clients, taking appropriate risks – happens to take us to being the biggest bank in the world, then that’s fine by us.”