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New leader to steer BofA sports strategy
Published September 20, 2010
Charles Greenstein, a 22-year veteran with Bank of America who previously managed the bank’s baseball partnerships, replaces Ray Bednar. Greenstein, who is based in the company’s Boston office, becomes Bank of America’s sponsorship chief at a time when its two most significant national deals, Major League Baseball and NASCAR, are up for renewal and the bank is being led in a more conservative direction by new CEO Brian Moynihan.
The official partnership with MLB ends this season, while the bank’s deal with NASCAR runs through 2011.
Bednar, who joined the bank in 2006, took a leave of absence for personal reasons late in the summer and his return is uncertain, although industry insiders say they don’t expect him to return. Bank officials said Bednar is in the process of pursuing other opportunities, which could be inside or outside the bank.
Bank of America, once one of the biggest spenders in sports sponsorship under Bednar, cut its national sponsorship portfolio in half in the last year, ending partnerships with the NFL and the U.S. Olympic Committee. The nation’s largest consumer bank still has a bevy of local agreements that provide national visibility, such as its deals with the New York Yankees, Dallas Cowboys and Washington Redskins.
It also has its name on the Bank of America 500 in NASCAR’s Sprint Cup Series, the Bank of America Chicago Marathon and Bank of America Stadium, home of the Carolina Panthers. The NASCAR race sponsorship ends this year, but industry sources say that the bank and Charlotte Motor Speedway are deep into discussions to renew.
Despite the loss of two highly visible national deals in the last year, the bank remains committed to sports marketing.
“There have been a lot of changes in our industry, but we continue to believe in the value of sports to drive our strategic objectives,” said Bank of America spokesman Joe Goode.
As recent financial reform reshapes the banking business, the bank is planning to shift the focus of its sports sponsorships away from affinity credit card and debit card opportunities and toward sponsorships that support cross-selling across areas ranging from wealth management to home loans to investment banking businesses.
For years, Bank of America’s sports spending was fueled by the company’s view that the partnerships delivered healthy returns. Bednar last year said that the sponsorships delivered $10 in revenue and $3 in earnings on every dollar spent. The return contributed to three aspects of its business: consumer banking, corporate investment and wealth management.
At the core of consumer banking has been Bank of America’s affinity credit card program, which featured teams, athletes and leagues on credit cards, debit cards and checks. Bank officials said sports affinity products were among the bank’s top-selling checking and credit card accounts in 2008 as former CEO Ken Lewis was pushing to be the top company in the credit card industry. This was on the heels of its 2006 acquisition of MBNA Corp. for $35 billion.
But new financial regulations signed into law this year have changed the value of the affinity business. Financial reform has introduced stricter consumer lending rules and lower transaction fees for debit cards.
In July, Moynihan estimated the new regulations would cost the bank’s global card services business $1.8 billion to $2.3 billion in annual revenue beginning in 2011. Moynihan said recently that overall demand for credit remains weak because of economic uncertainty and that he is repositioning the bank to rely less on credit card transactions and borrowing.
“There are several reasons you’d pull back from these deals,” said Robert Hammer, who runs his own credit consultancy firm in California. “Loan losses may have climbed to unsatisfactory levels. Affinity and loyalty are not what they used to be. Credit cards represent the least loyalty of any banking product. And of course, all of that leads to lessened profitability, perhaps to an unsustainable level.”
“It’s become more difficult to persuade card issuers that these deals are worth all of the skin they have in the game,” Hammer added, even though JPMorgan Chase recently agreed to a 10-year, $300 million deal to sponsor Madison Square Garden.
In light of that, the bank is planning a strategy shift that will emphasize other areas of its business. The move reflects not only the changes triggered by financial reforms but also the company’s acquisition of Countrywide (now known as Bank of America Home Loans) and Merrill Lynch. Those acquisitions delivered the bank a more diverse array of product and services, as well as customer base, than it had previously, and it wants future sponsorship opportunities to benefit those businesses.
The bank’s new sponsorship strategy will unfold over the next 12-18 months, Goode said.
“A central focus of our strategy will be to impart greater integration and activation of our global sponsorships across all our brands to engage more customer segments and to facilitate a greater level of cross-selling,” he said.
Bednar, a triathlete who usually rose before the sun to work out 15 hours a week, joined the bank in 2006 as senior vice president and global sponsorship executive after serving as CEO at Prism, a sponsorship, activation and event agency.
He immediately made an impact by striking several deals, including an official partnership with NASCAR in late 2006 and a deal to be the NFL’s official bank in early 2007.
Bednar also redistributed the bank’s sponsorship accounts from the Radiate Sports Group to Octagon for NASCAR, MLB and NFL, while golf went to IMG. The bank’s Olympics business stayed with Radiate’s GMR Marketing at the time.