Bank of America Corp CEO Kenneth Lewis announced he was retiring, after months of being dogged by a series of government investigations into the company’s acquisition of Merrill Lynch last year that had become a major distraction for the biggest US bank.
The reputation of the 62-year-old Lewis had been badly bruised by massive credit losses and the need for two government bailouts. But experts believe it was the intense scrutiny from federal regulators, state attorneys general and the courts that forced his hand.
“It’s a good thing for the company to make a clean break and move forward,” said Walter Todd, portfolio manager for Greenwood Capital Associates.
He said regardless of the reality, “the perception is, everything that happened with the Merrill transaction was his fault, and for Bank of America to move beyond that, Lewis would have to go.”
His retirement by the end of the year — which Lewis characterized as voluntary in a letter to employees — sets up a struggle within the bank’s ranks to be his successor, with six possible candidates seen vying for the job, including recently named wealth management chief Sallie Krawcheck, consumer banking chief Brian Moynihan and chief financial officer Joe Price.
His departure underlines the dramatic change there has been at the top of the nation’s banks in the past two years. Only Lloyd Blankfein, the head of Goldman Sachs Group Inc, and Jamie Dimon, CEO of JPMorgan Chase & Co, have survived. Some lost their jobs as their banks collapsed or were taken over. Others resigned or were forced out as results suffered.
Lewis’ planned retirement could raise new questions about the staying power of Citigroup Inc chief executive Vikram Pandit, who, like Lewis has been under pressure from regulators after his bank received a massive taxpayer bailout.
In addition to Krawcheck, Moynihan and Price, leading candidates to eventually replace Lewis include mortgage lending chief Barbara Desoer, investment banking chief Thomas Montag and Greg Curl, chief risk officer, bank spokesman Bob Stickler said.
Known as a dealmaker, Lewis built the largest US retail banking franchise through aggressive acquisitions.
Yet his last deal appears to have been his undoing.
In September last year, the bank announced a US$50 billion buyout of Merrill Lynch & Co at the height of the financial crisis.
At the time, Lewis and the bank were heralded as saviors of the financial system.
But they began to draw public ire when questions arose early this year about how the bank publicly disclosed roughly US$3 billion in accelerated Merrill Lynch bonus payments, and billions in Merrill Lynch losses during the fourth quarter of last year in advance of a shareholder vote on the deal.
In a letter to employees, Lewis said his retirement was at his decision, and not the result of outside pressure, either from the board, or regulators and the government.
A successor will be selected in advance of Lewis’ retirement, and there will be an unspecified transition period before his retirement at year-end, Stickler said.
While some investors still believe the Merrill deal will be a long-term success for the bank, in the short term it spawned on-going investigations into what senior executives, namely Lewis, knew about the deal and failed to disclose publicly.
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