Now that Bank of America Corp. is freeing itself from the government restrictions that hampered its search for a new CEO, the company should look more appealing to prospective candidates, especially those from outside the company.
Bank of America, which announced late Wednesday it plans to repay its $45 billion in bailout money, has been searching for a new CEO since it announced in late September that chief executive Ken Lewis planned to retire Dec. 31. But the bank, like other companies that have received bailouts, has been operating under a number of government restrictions, including having to get approval from federal pay czar Kenneth Feinberg for how much it can pay its new leader.
Those restrictions are now gone.
The bank "has talked to a lot of people and obviously (those people) want to make a market wage, but by far it's the regulatory scrutiny that has kept them from saying yes to the job," said Tony Plath, a finance professor at the University of North Carolina at Charlotte.
Plath says he expects an announcement of a new CEO could come "within the next five days or so."
The bank has said it is considering candidates from inside and outside the company, and spokesman Scott Silvestri said Thursday a decision will be made "in the near future."
Analysts remain divided about whether Bank of America would be better off choosing a CEO from within its ranks or going outside the company.
Plath said an outsider would bring in fresh blood to the bank, "assuming the person has no ties to Lewis." Close ties to Lewis may not sit well with shareholders, who stripped Lewis of his chairman title earlier in the year due to his management of the bank.
Media reports have said those who have previously spurned the bank's advances include Bank of New York Mellon Corp. CEO Bob Kelly; Bob Diamond, president of British bank Barclays Plc; Larry Fink, CEO of asset manager BlackRock Inc.; and New Jersey Gov. Jon Corzine, a former Goldman Sachs chairman and CEO.
FBR Capital Markets analyst Paul Miller said the problem with hiring an outsider is, "you are going to get people who rather break up the company" than run it as is. A Wall Street Journal report Wednesday said at least two candidates told bank directors that the company should consider breaking itself up. The report said the board is reluctant to do so.
"When you go inside, you'll probably get the commitment to keep the company together," Miller said.
NAB Research analyst Nancy Bush said she also thinks the bank will choose an internal candidate, but has some reservations.
The bank has said insiders Chief Risk Officer Gregory Curl and Brian Moynihan, the head of consumer banking, are being considered as Lewis' replacements.
Curl helped negotiate the bank's repayment of the government bailout money, and that leaves Bush to believe that there's a chance he could be named interim CEO.
If Curl is chosen, it's possible his term could be for a transitional period of one to three years, giving time to continue a CEO search or prep Moynihan for the CEO role, Bush said.
Curl, 61, has been with the bank since 1996 and became chief risk officer in June. He was also a key player in negotiating the bank's acquisition of Merrill Lynch & Co. in January, which could potentially hurt his chances of getting the job, some analysts say. Although the bailout money is being paid back, the new CEO will need to restore the company's relationship with federal regulators and improve its standing with members of Congress who have criticized Lewis and the bank for much of the 11 months since the Merrill Lynch deal closed.
Moynihan, 50, is considered by analysts to be a top candidate, although House Oversight Committee Chairman Edolphus Towns said last month he may lack the needed leadership. Bush said Moynihan is considered by some to be too young for the post.
Bank of America was eager to pay back the $45 billion it received from the government, but needed the approval of regulators.
The bank said in a statement it would use available cash and raise $18.8 billion in capital to repay the government, which it has been trying to do for months. Investors see the bank's move as a sign of its increasing strength and that economic conditions are improving. The bank's shares rose 11 cents to $15.76 Thursday despite an overall downturn in the market.
Whoever becomes the new CEO will have to deal with rising losses from failed loans that all banks are contending with. The losses are expected to continue into 2010 as consumers struggle to keep up with their bills. In the third quarter, Bank of America lost more than $2.2 billion.
The bank also still faces regulatory investigations into the Merrill Lynch acquisition, including federal and state demands for information about the billions of dollars in bonuses paid to Merrill Lynch employees just before the deal was sealed.
Bank of America Corp. didn't pay Lewis or any of its other top executives a bonus last year, like most major U.S. banks, saying its 2008 financial results didn't meet its expectations.
Lewis received the same salary as he did the year before, $1.5 million, as well as $275,125 in perks such as air travel, up slightly from the prior year. Lewis had received a bonus of $4.25 million in 2007.
In October, BofA announced that Lewis will get no salary or bonus for 2009 under an agreement with the government's pay czar.