June 04, 2010
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News: BofA Changes Direction; To Support Businesses
While Bank of America, the largest U.S. bank in terms of assets, continues to experience the nation's highest credit card write-offs and delinquencies, its CEO pledges to cap growth. According to Chief Executive Brian Moynihan, the bank was overly aggressive in expanding its credit card business prior to the nation's financial crises over the past two years. At a Sanford Bernstein Strategic Decisions Conference in New York, Moynihan said the company "pushed the dial at the wrong time." Although Moynihan did not disclose specifics on the company's decision to cap growth in certain areas of the county, he did note that the bank's credit card business should not "outpace" those of the nation's economy.
Meanwhile, Moynihan announced that in an effort to promote growth in the job market and aimed at reducing the unemployment rate, the company will be focusing their efforts on the small, mid-size, and minority-owned business sectors. As the bank begins to separate itself from the credit card market, over the next five years it plans to dump over $10 billion into such companies as ad agencies, furniture dealers and manufactures, and law firms. The bank's plan includes filtering nearly $1.9 billion during 2010 and an additional $2 billion each year over the next five years. The decision to realign its five year growth plans and strategies comes as a surprise since Bank of America held nearly $149 billion in credit card debt at the end of first quarter 2010.
Small businesses have been particularly hard hit with the credit crunch and many have been forced out-of-business when credit card companies began increasing interest rates and slashing credit limits. To make matters worse, new card reform deliberately eliminated the business sector from the law because banks complained that small businesses have a higher risk factor. New proposed financial reform rules look to offer small businesses greater protections however limited. Some may find a haven as Bank of America prepares its new strategies.