Moynihan’s Silence Is a Victory Cry for Bank of America Investors

by Dan Burrows | September 12, 2012 7:00 am

The scandals embroiling the nation’s biggest banks sure have quieted down all of a sudden.

Hell, maybe someone needs to check the side of a milk carton for Bank of America (NYSE:BAC[1]) CEO Brian Moynihan, because it seems like he hasn’t been heard from in a year.

The London Whale trading disaster that made JPMorgan Chase (NYSE:JPM[2]) CEO Jamie Dimon the summer’s big banking villain[3] has petered out, too — assuredly much to his relief.

And, jeez, has it really been years now that Goldman Sachs (NYSE:GS[4]) CEO Lloyd Blankfein has been the top target of both the press and Capitol Hill?

It’s almost eerie not having at least one of the nation’s top bankers defending his company or industry from, say, mortgage-servicer fraud, selling products designed to fail or losing billions on complex derivatives bets.

But, happily for investors in financial sector stocks, having your CEO go missing means something’s going right for your bank.

Take BAC’s Moynihan. He was a subject of wall-to-wall coverage when the bank was coughing up $8.5 million as part of the broader mortgage lawsuit settlement — but that was a hit the Dow component took in the second quarter of last year.

The CEO had to wear an even bigger “Kick Me” sign in the fall of 2011 when the bank tried to institute a $5 debit card fee[5].

But cut to this year and, lo and behold, the nation’s second-biggest bank by assets (after JPM) is on the mend[6].

Hallelujah, more borrowers are paying their loans on time! Indeed, the cash the bank set aside to cover bad loans in its most recent quarter dropped 46% over last year to hit $1.8 billion — the smallest figure BAC booked in five years, or from before the financial crisis.

Yes, Countrywide still is an albatross[7], but BAC’s mortgage business is growing, thanks to once-in-a-lifetime low rates spurring folks to refinance or even take out new loans.

Meanwhile, BAC has been shedding non-core businesses and raising capital at a healthy clip — just like Moynihan said it would. Since he took the helm at the beginning of 2010, BAC has unloaded more than $50 billion in businesses and other assets.

And ever since Moynihan dropped out of the headlines, the balance sheet and stock price have only been looking up.

BAC hit a 52-week low in December, not long after an overwhelming public backlash forced the bank to give up on its debit-card fee hike[8]. Shares are up about 80% since that time, and 60% for the year-to-date.

Yes, the financial sector has been on a tear since late July, when dovish comments from the president of the European Central Bank reignited the risk-on trade — but even so, BAC has been a standout.

The benchmark Select Sector Financial SPDR (NYSE:XLF[9]) has rallied 10% since July 23. The S&P 500 is up more than 7%.

As for BAC? It has spiked 26%.

No offense to Mr. Moynihan, but when it comes to BAC shareholders, apparently the less they see of him, the better.

As of this writing, Dan Burrows did not hold positions in any of the aforementioned securities.

  1. BAC:
  2. JPM:
  3. the summer’s big banking villain:
  4. GS:
  5. tried to institute a $5 debit card fee:
  6. is on the mend:
  7. Countrywide still is an albatross:
  8. forced the bank to give up on its debit-card fee hike:
  9. XLF:

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