Keep him hungry

17 April 2013 By Agnes T. Crane

Half of Brian Moynihan’s pay is now tied to hitting specific targets for return on assets and tangible book value by 2015. The bank’s $2.3 billion first-quarter showing is better than last year. But without significant further improvement, Moynihan’s going to fall way short.

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On April 17, Bank of America reported first-quarter net income of $2.6 billion with $2.25 billion applicable to common shareholders. At 20 cents a share, results missed the consensus of 22 cents a share expected by sell-side analysts.
Revenue rose 5 percent to $23.5 billion compared with the same quarter last year. Non-interest expense rose 5 percent to $19.1 billion with litigation costs fueling the increase.
The bank reported a return on assets of 0.48 percent and growth in adjusted tangible common book value of 3.7 percent from the prior year. Return on assets averaged just 0.19 percent in 2012.
According to the bank’s 2013 proxy, Chief Executive Brian Moynihan was awarded $5.5 million in performance-restricted stock units as part of his 2012 compensation package. The awards will be settled in cash in three years’ time. The amount will be determined by the achievement of certain return on assets and adjusted tangible book value growth goals. Moynihan will be awarded nothing if the three-year average ROA is less than 50 basis points and adjusted TBV growth is less than 5.25 percent.
The bank also announced that it had settled a lawsuit centered on legacy mortgage-backed securities for $500 million. Finance chief Bruce Thompson said the mortgages involved in the suit had an original balance of $350 billion and represented 70 percent of outstanding or potential claims.

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