Tumultuous year in investment banking at Bank of America Merrill Lynch

Getty/Justin Sullivan

• Bank of America Merrill Lynch has had a tumultuous year in investment banking, even before global investment banking chief Christian Meissner’s departure was announced. 
• Early on, the bank had to deal with a loan gone bad to Steinhoff International, which cost the firm nearly $300 million.
• Amid a record year of mergers-and-acquisitions, Bank of America’s performance has dragged, and the firm has lost ground to competitors. 

It had been a tumultuous year for Bank of America Merrill Lynch’s investment bank — even before the firm lost long-time group head Christian Meissner, whose departure was announced Thursday. 

Troubles started at the end of 2017, when the bank began to grasp the magnitude of losses it was staring down from a loan gone wrong to the ex-chairman of scandal-plagued South African retailer Steinhoff International.

Steinhoff blew a more than $1 billion hole in fourth-quarter earnings across Wall Street, but the $292 million charge Bank of America announced in January was among the worst. The bank hired outside law firm Davis Polk & Wardwell late last year to investigate how things went so badly.

In May the firm lost capital markets chief A.J. Murphy — one of the highest ranking women on Wall Street — to private-equity firm Silver Lake. 

Meanwhile, investors have been scratching their heads as Bank of America’s investment banking performance has slid while the rest of Wall Street has been on the upswing. 

Amid a record $2.5 trillion global mergers-and-acquisitions boom, Bank of America’s first-half investment banking advisory fees declined, falling 7% to $1.4 billion. 

After coming in third in global investment banking revenue the past three years, Bank of America has slipped to fourth so far in 2018, according to data from Dealogic. 

The drop-off is especially stark in the US, where the bank ranks ninth in US M&A fees this year, down from fourth in 2017, according to the latest data from Dealogic. That puts them behind Barclays, Jefferies, Credit Suisse, and Evercore.

When asked about the lagging advisory fees in the second-quarter earnings call, CEO Brian Moynihan said that “the team knows they can do a better job and are after it.”

Colleagues say Meissner has taken some of the blame for both Steinhoff and the floundering M&A performance, according to the Financial Times.

“The problem was he looked after his allies and demoralized top producers, and the M&A business suffered,” a senior investment banking official at the bank told Business Insider. 

Meissner’s departures comes ahead of third-quarter earnings, due to be announced in October, and the senior official said the bank is bracing for more bad news from M&A, with the pain in the US and Canada being especially acute. 

A spokesman for Bank of America declined to comment.

Meissner deserves credit for taking the helm of Bank of America’s investment bank amid severe post-financial crisis struggles, and reshaping the firm into a perennial top-3 contender on the league tables. 

But his departure comes with the division on a precarious footing and a downward trajectory. 

Get the latest Bank of America stock price here.