Good morning, Term Sheet readers.
When Brian Moynihan became CEO of Bank of America in 2010, he was dismissed as a colorless attorney who lacked the operating expertise to rescue the flailing colossus. In a column published last night, Fortune’s Shawn Tully explains how Moynihan has turned into Wall Street’s most unlikely star.
In its fourth quarter report, it reported the highest earnings in company history. The bank posted a $8.7 billion in pre-tax earnings, lifting the total for the full year to $34.6 billion, a 25.3% gain over 2017. In two days, B of A’s stock jumped 9.2%, adding $30 billion in market cap.
When Moynihan first took the job, he swore by a back-to-basics strategy that has served him well, Tully writes. From the story:
Those numbers enshrine Moynihan as Wall Street’s most unlikely star. He deserves that status by never wavering from the playbook that he first championed shortly after becoming CEO in the dark days of 2010. At the time, Moynihan pledged a return to the kind of low-risk, grow-with-your customers banking that prevailed in the 1950s.
The idea was that banks are handed a treasure trove in the form of deposits at near-zero or extremely low rates. Banks, Moynihan said, should generate excellent profits by lending out those cheap deposits at far higher rates for credit card, corporate, margin, mortgage, and consumer loans. The rub is that for the past two decades, the banks almost invariably squandered the profits made in good times by taking big risks, especially in speculative trading and underwriting exotic securities. Moynihan promised to deploy capital markets to serve corporate clients, not chasing speculative windfalls.
DAVOS UPDATE: President Donald Trump cancelled the U.S. delegation’s trip to the World Economic Forum in Davos. Read more.
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