Bank of America: Warren Buffett Sells, Brian Moynihan Waffles

November 7, 2025 | We received several questions from subscribers to our Premium Service about the decision by Bank of America (BAC) to hold the first investor day since 2011.  We view BAC as among the worst managed public companies in the US, a combination of size and indifference that truly defies comparison. But ultimately bank regulators and investors, large and small, are to blame for tolerating this continued exercise in mediocrity.

The fact that CEO Brian Moynihan continues to characterize the poor performance of the bank’s $900 billion bond portfolio as a “misstep” instead of management negligence tells you all that you need to know, especially when you compare BAC’s balance sheet management with peers such as JPMorgan (JPM) and Citigroup (C). We wrote about the visible insolvency of BAC in May of 2023 ("Calculate the WAC of Bank of America").

When the officer of a bank fails to manage the institution properly, it is generally referred to using terms such as negligence, mismanagement, or breach of fiduciary duty. “Unsafe or unsound practices” is a regulatory term used by agencies like the Federal Reserve Board, Office of the Comptroller of the Currency (OCC) and the FDIC to describe practices, or lack thereof, that deviate from sound governance and risk management principles and have the potential to adversely affect the bank's condition. Silicon Valley Bank failed in 2023 because of such malfeasance, but BAC survived.

After the COVID shutdown in 2020-2021 and related action by the Federal Reserve Board, BAC came dangerously close to tipping over.  The $3.4 trillion bank experienced a significant outflow of deposits, forcing BAC to replace these liabilities with high cost brokered funds and other borrowings. This event drove up the cost of the bank’s funding to the highest level of large banks other that Citigroup, which safely employs high cost funding to support its subprime consumer and credit card business. The chart below shows interest expense vs average assets for the top-seven depositories.

Source: FFIEC

“Moynihan and the bank are under a lot of pressure,” notes a former BAC banker, who spoke to The IRA earlier this week. Warren Buffett's Berkshire Hathaway (BRK) has been consistently selling Bank of America stock since at least July 2024, reducing its stake by approximately 41% from its peak. Of note, in the 300-plus pages of presentations for the BAC Investor Day, the bank barely talks about its financial performance vs its large bank peers.

“Moynihan is trying to demonstrate that the business can grow. Hedge funds and other investors in the stock want price appreciation not just dividend," the banker notes. "The decision to host the investor day was made long ago. JPM does it every year. JPM CEO Jamie Dimon has taken away the excuses of big banks that they can’t grow.”

Rumors that Moynihan is on his way out are false, in our view, because BAC’s board of directors is entirely behind the incumbent. Brian Moynihan succeeded Ken Lewis as CEO of Bank of America on January 1, 2010, when essentially nobody else wanted the job. A decade of restructuring and litigation followed culminating 2014, when BAC resolved federal and state claims against Bank of America, its affiliates, and Countrywide Financial for their mortgage-backed securities activities leading up to the 2008 financial crisis.

More recently, the fact that BAC has refused to follow the example of other large banks, including PNC Financial (PNC), Truist Financial (TFC) and KeyCorp (KEY) to restructure their bond portfolios and thereby boost earnings, speaks volumes about the torpor inside the BAC board of directors. Even a modest program to sell COVID era assets and reinvest at higher yields would help asset and equity returns dramatically.  

As we suggested to the FOMC in our last post (“Should the FOMC End Fed Funds Targeting? Issue CMOs?”), BAC could restructure their low coupon Treasury and MBS into collateralized mortgage obligations (CMOs), sell half or more of the principal amount into an eager bond market, and retain the longer duration pieces to benefit from falling interest rates and rising prepayments. Reinvesting the proceeds of the sale of CMOs could help BAC dramatically boost earnings and the stability of the bank, but Moynihan and his board apparently won’t take the heat of a balance sheet restructure.

By doing nothing, Moynihan and his CSUITE team are waiting for a Fed rescue. But how long do we wait? As we can see on Page 8 of Bank America’s excellent financial supplement, the average yield on BAC’s $933 billion in investment securities is sub-3%. The cost to the bank of total interest bearing liabilities is 3.4%. Do the math. Now you know why Warren Buffett is selling Bank of America stock and Brian Moynihan just had his first investor day in almost 15 years. Hello.

The yield on total earning assets for BAC is 4.64% or on net 1.2% above the cost of earning assets.  The net yield on interest earning assets at JPM is 2.5% or more than 2x BAC. If we exclude capital markets and focus on the bank, the net yield on interest earning assets for JPM is 3.73%. The fact that Brian Moynihan has taken no steps to address this disparity in asset returns is why BAC trades on a $373 billion market cap or 1.3x book and JPM is close to $850 billion or 2.5x book value.  As the chart below illustrates, BAC's asset returns have been below the results of the top-seven banks and Peer Group 1.

Source: FFIEC

Aside from the poor yields on the BAC bond portfolio, which is one third of total assets, the yield on the loan book averages just 5.6% vs 6.7% for JPM. The $235 billion residential loan portfolio has an average yield of 3.5% as of Q3 2025. Again, the bank is at a striking disadvantage because of the high funding costs. The inability of BAC's commercial bankers to achieve higher prices for loans retained in portfolio, however, is another significant disadvantage. Keep in mind that BAC already has cut overhead expenses to the bone, yet the bank's efficiency ratio is 65%, a full 12 points above JPM's industry leading 52%. The purple line at the bottom of the chart showing operating efficiency (the cost of revenue) is JPM.

Source: FFIEC

The value destruction at BAC under CEO Brian Moynihan is one of the great sagas on Wall Street, yet analysts, equity managers and the financial media refuse to hold management accountable. Since the Great Financial Crisis, when the bank acquired its biggest warehouse customer, Countrywide Financial, and then promptly shut down the largest residential loan business in the US, Moynihan has mismanaged the bank by avoiding "risk" and also revenue.

The real question is why Warren Buffett and BRK ever wanted to own the stock in the first place. We've been a business customer of BAC and Merrill Lynch for more than three decades and own some of the preferreds, but we'd never own the BAC common stock as long as Moynihan is driving. Until Moynihan exits and the board of BAC is turned over, we don't see much hope for restoring value creation for shareholders at America's second largest bank.

Next week, we'll be featuring a discussion with the CEO of one of the most interesting junior miners in Canada for subscribers to our Premium Service.

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