(Adds analyst comment, detail about Moynihan’s background.)
By Dan Freed
NEW YORK, July 15 (Reuters) - Bank of America Corp Chief Executive Brian Moynihan has been hiring more sales staff in areas ranging from commercial lending to wealth management, in his latest effort to boost revenue that has barely budged for years.
The hires are part of Moynihan’s efforts to push the bank to sell more products to more customers. That strategy, known as “cross-selling,” can be lucrative if done properly, and is part of the defense the bank gives to investors who question whether the second-biggest U.S. bank should be smaller.
The potential to cross-sell drove Bank of America to buy many companies, including Merrill Lynch and mortgage lender Countrywide Financial, before and during the financial crisis.
But cross-selling is hard, and Moynihan has struggled to execute the strategy as successfully as Wells Fargo & Co , a bank that consistently generates more quarterly profit than Bank of America with fewer assets.
Increasing revenue is the next great challenge for Moynihan, who has spent much of the last several years fixing the bank’s legal problems. Bank of America said on Wednesday that its legal costs dropped for a second straight quarter, and analysts are increasingly confident that huge, multi-billion dollar settlements are largely in its past.
Moynihan recently has been focusing on hiring additional specialized sales people who can refer customers to other specialists as necessary, a shift from his prior strategy of training each employee that deals with customers to sell more products.
So instead of a bank teller trying to sell a branch customer a credit card and a mortgage, the teller might refer the client to a home loan specialist.
Before he can take a view on whether Bank of America’s strategy makes sense, CLSA analyst Mike Mayo said he wants the bank to be clearer about how it will lead to increased sales.
“Clearly they want more feet on the floor talking to clients. The question is how much will it cost, will it gain traction and which metrics are they trying to achieve?” Mayo said.
Bank of America is one of several major U.S. banks struggling with weak revenue as low interest rates cut into lending income.
The bank’s new hires have so far had a limited impact. Bank of America on Wednesday posted a tepid 1.7 percent increase in second-quarter revenue from the same period a year ago. Quarterly revenue at Bank of America has hovered around $22 billion since 2011.
The bank has added some 1,000 financial advisers since the second quarter of 2014, and increased the number of sales specialists for products like mortgages by 3.5 percent to 6,963. On a call with analysts, Moynihan said that increasing the number of specialized sales staffers is important.
“It is really just having more of them,” he said.
Chief Financial Officer Bruce Thompson told reporters on a conference call, “Ultimately revenues are driven by the number of client-facing personnel that you have and how well they do relative to their peers.”
Despite the focus on hiring sales specialists, the bank is laying off staff overall as it seeks to offset the weak revenue growth by cutting costs. The ranks of full-time employees in its consumer banking business dwindled nearly 10 percent from the year-ago quarter to fewer than 66,000. Bank of America has a regular cost-cutting program in place it calls “Simplify and Improve.”
Spokesman Jerry Dubrowski said Bank of America has been steadily increasing its sales force for some time.
But that expansion has been uneven, with growth in the ranks of sales specialists for small business loans and other products but fluctuations in the number of financial advisers. Bank of America does not disclose the size of its sales force for loans to larger businesses.
Boosting sales is a challenge for Bank of America partly because it already does business with one out of every two American households.
Still, hopes that units like Merrill Lynch can bring in clients who will buy products from other parts of the bank has long underpinned the bank’s strategy.
“We will now be able to more effectively serve the retail clients throughout their life cycle from college and home loans to...investments for college through retirement,” then chief executive Ken Lewis said just after the Merrill takeover deal was struck at the height of the 2008 financial crisis.
Some investors have questioned whether that strategy makes sense. At Bank of America’s annual meeting this year, investors voted on a proposal that called for the company to consider spinning off its investment banking business. The ballot measure failed. (Reporting by Dan Freed; Editing by Dan Wilchins and Christian Plumb)