By Elinor Comlay
NEW YORK, Jan 16 (Reuters) - Bank of America Corp's quarterly loss reported on Friday -- its first in 17 years -- combined with a $15.3 billion loss at its Merrill Lynch business has put the bank's CEO in the hot seat, analysts said.
Chief Executive Kenneth Lewis made what increasingly looks like a costly deal for shareholders when he agreed to buy Merrill Lynch on Sept. 15, after crippling credit losses and writedowns sent Merrill's shares spiraling
lower.
Lewis is facing fire from shareholders who believe the estimated $19.4 billion he paid for Merrill was too much, and that he did not spend enough time researching the company.
Now, the poor results of both banks are adding to the scrutiny of the 61-year-old chief executive.
'Lewis has lost an enormous amount of credibility and respect,' said Nancy Bush, analyst at NAB Research.
A Bank of America representative declined comment.
Lewis told investors on Friday he expects credit losses to stay high for several quarters, and he cut the bank's quarterly dividend to a penny a share, from 32 cents.
The results were bad enough that Lewis turned to the U.S. government for $20 billion of extra capital and coverage for a $118 billion portfolio of toxic assets.
Lewis has presided over a sharp drop in Bank of America's share price, which has fallen 41 percent so far in 2009. The shares fell on Friday to $7.01, their lowest level since 1991.
'All the explanation in the world is not really going to assuage calls from many of his shareholders for his head,' said Gary Townsend, president of Hill-Townsend Capital, a Maryland hedge fund specializing in financial companies. 'Is there someone else who can step in and run the company at this point? I should hope so.'
Bank of America has a handful of executives perceived as candidates to replace Lewis eventually, including mortgage chief Barbara Desoer and general counsel Brian Moynihan.
John Thain, Merrill's chief executive, effectively joined that list when he was named head of investment banking, securities and wealth management at Bank of America.
Thain and Lewis together negotiated the sale of Merrill in the same 48-hour period that saw efforts to save Lehman Brothers Holdings Inc fail.
Media reports have suggested a strained relationship between Lewis and Thain, with one analyst saying that Friday's losses will add to the bad feelings.
'The news calls their relationship into question, as well as their abilities,' said Anton Schutz, a portfolio manager at Mendon Capital Advisors in Rochester, New York, who owns Bank of America shares.
Tension had already sparked between Lewis and Thain after the latter sought a bonus of more than $10 million for 2008, the Financial Times reported on Thursday.
Thain's plan left Lewis 'purple-faced' with rage, the newspaper reported, citing an unnamed North Carolina executive. Thain said in December he would not seek a bonus for 2008.
Lewis publicly backed Thain on a call with analysts on Friday. 'We are happy that John Thain has assumed a major role at Bank of America,' he said.
(Reporting by Elinor Comlay, editing by Matthew Lewis) Keywords: BANKOFAMERICA/LEWIS (elinor.comlay@thomsonreuters.com; + 1 646 223 6116) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Jan 16 (Reuters) - Bank of America Corp's quarterly loss reported on Friday -- its first in 17 years -- combined with a $15.3 billion loss at its Merrill Lynch business has put the bank's CEO in the hot seat, analysts said.
Chief Executive Kenneth Lewis made what increasingly looks like a costly deal for shareholders when he agreed to buy Merrill Lynch on Sept. 15, after crippling credit losses and writedowns sent Merrill's shares spiraling
lower.
Lewis is facing fire from shareholders who believe the estimated $19.4 billion he paid for Merrill was too much, and that he did not spend enough time researching the company.
Now, the poor results of both banks are adding to the scrutiny of the 61-year-old chief executive.
'Lewis has lost an enormous amount of credibility and respect,' said Nancy Bush, analyst at NAB Research.
A Bank of America representative declined comment.
Lewis told investors on Friday he expects credit losses to stay high for several quarters, and he cut the bank's quarterly dividend to a penny a share, from 32 cents.
The results were bad enough that Lewis turned to the U.S. government for $20 billion of extra capital and coverage for a $118 billion portfolio of toxic assets.
Lewis has presided over a sharp drop in Bank of America's share price, which has fallen 41 percent so far in 2009. The shares fell on Friday to $7.01, their lowest level since 1991.
'All the explanation in the world is not really going to assuage calls from many of his shareholders for his head,' said Gary Townsend, president of Hill-Townsend Capital, a Maryland hedge fund specializing in financial companies. 'Is there someone else who can step in and run the company at this point? I should hope so.'
Bank of America has a handful of executives perceived as candidates to replace Lewis eventually, including mortgage chief Barbara Desoer and general counsel Brian Moynihan.
John Thain, Merrill's chief executive, effectively joined that list when he was named head of investment banking, securities and wealth management at Bank of America.
Thain and Lewis together negotiated the sale of Merrill in the same 48-hour period that saw efforts to save Lehman Brothers Holdings Inc fail.
Media reports have suggested a strained relationship between Lewis and Thain, with one analyst saying that Friday's losses will add to the bad feelings.
'The news calls their relationship into question, as well as their abilities,' said Anton Schutz, a portfolio manager at Mendon Capital Advisors in Rochester, New York, who owns Bank of America shares.
Tension had already sparked between Lewis and Thain after the latter sought a bonus of more than $10 million for 2008, the Financial Times reported on Thursday.
Thain's plan left Lewis 'purple-faced' with rage, the newspaper reported, citing an unnamed North Carolina executive. Thain said in December he would not seek a bonus for 2008.
Lewis publicly backed Thain on a call with analysts on Friday. 'We are happy that John Thain has assumed a major role at Bank of America,' he said.
(Reporting by Elinor Comlay, editing by Matthew Lewis) Keywords: BANKOFAMERICA/LEWIS (elinor.comlay@thomsonreuters.com; + 1 646 223 6116) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.