Bank of America’s Lewis Says He Can Go It Alone as Stock Slides
Feb. 21 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis, under siege from investors on concern the company may be taken over by the U.S. government, said he doesn’t need any more federal assistance and can “make it through this downturn on our own.”
Lewis, speaking in a memorandum to employees yesterday as his stock price plummeted as much as 36 percent, said he aimed to “prove cynics and critics wrong” by spurning attempts at nationalization. Bank of America, the biggest U.S. bank by assets, has already received $45 billion in bank rescue funds.
The 61-year-old banker defended the independence of his Charlotte, North Carolina-based lender as concern mounted that takeovers will wipe out shareholders of financial companies. New York-based Citigroup Inc., the No. 3 bank by assets, also slid as much as 36 percent yesterday.
Treasury Secretary Timothy Geithner’s refusal to clarify his intentions regarding either bank “is allowing for the absolute decimation of the values of Bank of America and Citigroup on a daily basis,” said William Smith of Smith Asset Management in New York. “All he has to do is come out and say there is no nationalization.”
U.S. Senator Christopher Dodd, chairman of the Banking Committee, also weighed in on the debate, saying in a Bloomberg Television interview yesterday that some banks may have to be nationalized “for a short time” to survive the worst economic slump in 75 years. Former Federal Reserve Chairman Alan Greenspan told the Financial Times last week that the U.S. may have to temporarily nationalize some banks.
Treasury Addresses ‘Rumors’
Bank stocks pared some of their losses yesterday after U.S. Treasury spokesman Isaac Baker said “rumors” about bank nationalization shouldn’t be interpreted as policy. He also reiterated Geithner’s view that the nation’s private financial system should be maintained. Bank of America ended the day down 3.6 percent. Citigroup fell 22 percent.
“Fears of nationalization are incredibly exaggerated,” said Christopher Marshall, a former chief financial officer at Fifth Third Bancorp who previously worked at Bank of America. “Treasury wants to keep it afloat as a public industry, not government-owned.”
Any attempt at nationalization would probably have to wait until regulators conduct so-called stress tests to determine whether they can weather future shocks. While officials haven’t said how the tests will be conducted, Lawrence Summers, President Barack Obama’s top economic adviser, said on Feb. 13 that it’s possible some banks may be shut as a result of the tests.
Few ‘Clear Signposts’
“Every investor wants to know where are we going, how are we getting there, and again the government is not giving us clear signposts,” Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Inc., which oversees $2.5 billion, said in a Bloomberg TV interview. “They are being, I would say, almost tone deaf to the calls for clarity.”
In Mexico City yesterday, Citigroup CEO Vikram Pandit, 51, said his bank is committed to its Mexican unit, Grupo Financiero Banamex SA. Speculation has mounted in recent weeks that Citigroup, also the recipient of $45 billion in U.S. government funds, may sell Banamex to raise cash and shore up capital amid the global financial crisis. Pandit didn’t address the debate over nationalization.
In his memo yesterday, Lewis also pointed to signs that his business is on an upswing.
Bank of America’s trading businesses is “vastly improved” over the fourth quarter as both high-yield and high-grade corporate debt markets thaw, Lewis said. The Merrill Lynch & Co. acquisition, completed on Jan. 1, is leading to mandates to raise capital for clients, while the mortgage unit is processing record levels of loans, he said.
Bank of America’s brand “took a beating in January,” then strengthened this month based on customer satisfaction scores, Lewis said. Several senior Merrill Lynch executives left the bank in January, including former CEO John Thain and Greg Fleming, head of investment banking.
To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net
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