Bank of America (NYSE: BAC) CEO Brian Moynihan to Shake-Up Company’ Credit Card Business

Incoming Bank of America CEO Brian Moynihan will face the task of shoring-up Bank of America’s struggling credit card business when he takes over next week. Bank of America’s credit card business under Moynihan’s helm in his previous position as president of consumer and small-business banking, but the executive had only been in the position since August and has not had significant time to get his hands around the problem.

Moynihan has stated publicly that Bank of America has made mistakes in its credit card business and that there’s a lot of room for improvement. In a November 5^th speech, he said, “We gave a lot of cards out to our customers. We were giving them to too many people.”

Moynihan has discussed a “repositioning” of the company’s business so that it would rely less on credit card transactions and borrowing. The incoming CEO has acknowledged the new business won’t be as large or as profitable as it used to be.

Bank of America is currently the second-largest credit card issuer in the United States just after JP Morgan Chase & Co. Income from the company’s credit card division accounted for 23% of the company’s revenue during the first three-quarters of 2009. Bank of America’s credit card division also lost $4.5 billion during that same period, making it the worst-performing business line in Bank of America.

Many of Bank of America’s current issues are a result of the company’s push to become the top firm in the credit card business. In 2006, Bank of America purchased MBNA Corp, one of the largest credit card issuers for $35 billion, hoping to combine Bank of America’s branch network with MBNA’s marketing and underwriting skills. The move was part of a larger strategy from the company to dominate just about every category of finance from home mortgages to wealth management and commercial lending.

Bank of America has made poor underwriting choices and the financial crisis of the last two years has exposed many of the flaws in Bank of America’s underwriting models. While trying to become the largest small-business lender, the company offered unsecured credit lines of up to $100,000 to start-up business, some that had only been in business for one day. Bank of America has had a small business default rate of 17.5% during the third quarter of 2009.

Bank of America’s unsecured credit business is one of the largest in the industry, but it’s still struggling. Moynihan will have to take the issue head on as he takes the helm at Bank of America.