IR team wins plaudits from investors despite the difficulties associated with the company's Merrill Lynch acquisition
Banks have had a tough time of it of late. First came the stock price slumps, then the calls for increased disclosure. It was only a matter of time before the lawsuits arrived. Goldman Sachs first heard about the SEC’s litigation just days before it was due to report quarterly figures. As well as being bad news for Goldman, the saga has underlined the investment community’s fragile confidence in banking stocks.
When Bank of America (BAC) reported its first quarter results, investors were unable to shake off concerns about the general state of the financial sector. ‘The SEC announced the Goldman lawsuit 15 minutes after we reported our first quarter results. Investors were pleased with our results but the stock went down because of the commission’s announcement,’ explains Lee McEntire, senior vice president of investor relations at BAC.
Despite the difficulties, however, McEntire thinks the darkest days are over. ‘Things are much calmer now,’ he says. ‘The hardest time was definitely back in January and February 2009 when the stock was around $2.50.’
In January 2009 BAC announced it was being bailed out by the federal government because of losses associated with Merrill Lynch, the troubled bank it had recently acquired. Some news outlets maintained that BAC knew of Merrill’s losses long before it disclosed the scale of the difficulties to shareholders, who had voted on the transaction on December 5, 2008.
Yet the company has defied its critics with those polled in IR magazine’s Investor Perception Study, US 2010, commending the IR team on its exemplary professionalism. The NYSE-listed bank was nominated for the grand prix for best overall IR (mega-cap), best IRO (mega-cap), best crisis communications (large to mega-cap) and best IR in the financials sector. BAC wasn’t the only strong performer at this year’s US awards, either: JPMorgan won the award for best overall investor relations and best corporate governance
In the best IRO category (mega-cap), McEntire and his IR colleague Kevin Stitt picked up the award, pipping JPMorgan to the prize. ‘Mine and Kevin’s philosophy is very alike: it stems from our banking and company philosophy,’ McEntire notes. ‘We have always picked up the phone and never tried to differentiate folks by the size of their investment because it is always relative to them. Years of experience really help in difficult times – if you were new to the game and freaking out, that wouldn’t reassure investors.’
McEntire and Stitt are joined by just one other person in the investor relations team. ‘Essentially, we all perform a similar role but Kevin’s is more strategic – he deals with the management team – whereas my role involves more direct contact with investors,’ says McEntire.
Market perception
‘During the financial crisis, the hardest thing was having no control over what the market was thinking; it was all about market perception rather than reality driving stock prices,’ McEntire recalls. ‘You couldn’t get management in front of anybody because no one could say when things were going to calm down.’
McEntire has been at the company since 1989 and performed various roles in the finance group before moving to IR seven years ago. ‘Since joining the IR function I’ve learned that the Street wants to know you are a voice for the company and well-connected to the management team,’ he observes.
At BAC, the IR team is close to the CEO, the chief risk officer and CFO, reporting to the latter and being located alongside all three in Charlotte, North Carolina (the bank had an IR representative in New York for the six months after it bought Merrill Lynch). McEntire considers himself to be closely connected with the CEO’s office, and the IR team makes every effort to make use of the CEO’s hectic travel schedule by arranging an investor meeting or two every time he visits a major city.
IR sits with the financial media chief, who reports to the CEO, which helps with consistent messaging. ‘Even more important is the fact that we are well-connected and supported by a great finance team and risk partners,’ notes McEntire. ‘They provide immediate responses to tough questions to help us develop message plans.’
Expansion
There are downsides to rapid expansion, however. ‘One of the trickiest things now is that the management team is more spread out: of the six or seven businesses, we have only two line heads here in Charlotte,’ says McEntire.
After the Merrill Lynch acquisition, the firm acquired a few more non-domestic shareholders but investors remain concentrated in New York and Boston. ‘It used to be easy for a group of five buy-side analysts to sit in on a day of senior management meetings in Charlotte,’ McEntire adds. ‘It’s harder now that we are more spread out.’
Like many IROs, McEntire thinks issuers would benefit from getting together more to discuss the challenges they face within their sectors. ‘We don’t talk to our IR peers as we should,’ he says. ‘I talk to some other banks about how they are reporting things but you can’t go into too much detail.’
Despite all the hard work associated with communications in the banking sector, McEntire finds it worthwhile. ‘After all we’ve been through, to be recognized with an award really does mean something,’ he says. ‘As a company, we always say we don’t need rock stars; we just need people to get the job done. But it’s still nice to be recognized occasionally.’
What the buy side and sell side say
‘Although Bank of America had a very difficult year with many complex and difficult issues to discuss, the IR team did an outstanding job of being as communicative and helpful as it could be. It is easy to be that way when everyone on the Street loves you; it is much more difficult when things are not going well. Kevin Stitt, Lee McEntire and their team deserve special recognition for being visible and communicative in what had to be one of the most difficult years ever for the company.’
‘Bank of America’s IR was very effective in communicating the story during a very difficult time for the company. The questions about the company’s financial situation were coming in on an hourly basis, and the team did a great job of professionally handling those questions in an honest and effective manner.’
