BofA says it is not 'too big to manage'

Bank of America put up a defence of its structure at its annual meeting on Wednesday, countering charges from a shareholder that its sprawling size made it "too big to manage".

In recent years the second-biggest US bank by assets has paid $36bn in litigation expenses, many of them arising from its 2008 acquisition of Countrywide, one of the most aggressive originators of mortgages in the run-up to the crisis. This year it received only a partial credit in the annual stress tests carried out by the US Federal Reserve, with the regulator ordering it to report back in six months on measures to improve its management of capital.

These are among many signs that the bank should give more serious consideration to breaking itself up, said Bart Naylor of Public Citizen, a consumer advocacy group. He had logged a non-binding proposal asking the board to produce a "rigorous study" on the pros and cons of its structure, which runs a gamut from investment banking to wealth management.

"We do have a grade administered for your company, and that is the share price - which is one-fourth, one-fifth of what it used to be, before you started putting this bank together," he said, noting that investors in General Electric appeared to welcome the group's announcement last month that it would sell its finance arm.

Brian Moynihan, chairman and chief executive, devoted much of his opening address to an explanation of the benefits of scale, saying that the bank's integrated model served clients better and led to "significant benefits" to shareholders via diversification of earnings streams, cost synergies and cheap funding. Breaking up would lead to the loss of about $19bn in markets and investment-banking revenues, he said, adding that "size does not necessarily mean more risk".

The case for staying together - the most detailed the bank has offered to date - comes amid repeated calls from analysts, regulators and politicians for banks to take more radical measures to improve returns and to make themselves safer.

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On Wednesday, Vermont Senator Bernie Sanders, who has launched a long-shot bid for the 2016 Democratic presidential nomination, introduced legislation to break up the five biggest banking groups, saying that post-crisis reform efforts had not put an end to "casino-style gambling".

Mr Naylor's proposal to BofA was one of four from shareholders that were opposed by the board and defeated, after votes were tallied. BofA did not provide an immediate breakdown of the results.

Before the meeting, institutional investors had been vocal about their displeasure over the board's decision last October to recombine the role of chairman and chief executive, five years after investors backed a move to separate the roles.

On Monday, the bank said it would offer shareholders the chance to "ratify" that decision at the annual meeting next year.

The groundswell of opposition - evident in early votes filed - probably forced the bank to take pre-emptive action, said Robert McCormick, chief policy officer at Glass Lewis, a proxy advisory firm.

"For such a drastic change - going back on what had been approved - consultation would have been advisable," he said.

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