CHARLOTTE -- Bank of America Corp. on Monday confirmed that its head of structured products left the company Friday, a day after the Charlotte bank reported dismal third-quarter results in its corporate and investment banking unit.
Within this unit, Chris Hentemann had been in charge of products such as mortgage-backed and asset-backed securities and related trading. These investments, which are based on underlying mortgages and other assets, plummeted in value this summer during a global credit crunch sparked by defaults in loans to borrowers with spotty credit.
Bank of America chairman and chief executive Ken Lewis on Thursday said he was reassessing the corporate and investment bank after it helped depress overall third-quarter earnings by 32 percent. Most major banks, including Charlotte's Wachovia Corp., reported a tough third quarter.
During a conference call with analysts Thursday, Lewis expressed disappointment with the unit that provides Wall Street-style services such as stock and bond offerings as well as lending to corporate clients. "There will be some scaling back," he said.
Lewis said then that an evaluation of the unit would become more clear in "the next week or so" and that changes could be announced later this year or early next year. The unit is led by Bank of America vice chairman Gene Taylor, who took over the position in 2005 when mid-sized lending was melded with investment banking.
Since late 2004, Bank of America has spent $675 million to hire more traders, salespeople and bankers as part of an ambitious expansion effort. The buildout started under Al de Molina, who became the bank's chief financial officer before leaving in late 2006.
Bank of America spokeswoman Louise Hennessy declined to give a reason for Hentemann's departure. He will be replaced by George Ellison, who had previously worked for the New York-based Hentemann.
Hentemann had been in his position since a restructuring announced late last year. He had replaced Pat Augustine, who left to pursue other opportunities, according to the bank. In June, the bank also announced the departure of global markets head Mark Werner and three other senior executives.
On Thursday, Bank of America said profits in corporate and investment banking, which is largely based in New York, fell 93 percent to $100 million from $1.4 billion last year. Structured products had a net revenue loss of $527 million due to lower fees and trading losses during the market meltdown.
Overall, Bank of America still made $3.7 billion, the most of any U.S. bank in the quarter, buoyed by results in consumer banking.
Independent bank analyst Nancy Bush of NAB Research in Aiken, said Lewis, who grew up in commercial banking, knew of the risks of the business when he got into it. But the most recent quarter showed how controls to prevent losses can fail and how increasingly complex and global capital markets have become.
"I don't think you really know how much risk you're taking until everything goes wrong," Bush said.
Wachovia on Friday said its Charlotte-based corporate and investment banking profits fell 80 percent to $105 million, mostly on a $1.3 billion writedown of the value of securities and loans. Overall, the company's earnings were down 10 percent to $1.7 billion.
The company said it plans to eliminate about 200 jobs within investment banking by year end but hasn't revealed specifics. During the third quarter, it cut an undisclosed number of jobs in the Vertice mortgage unit housed within corporate and investment banking.