Bank of America Corp. chief executive officer Kenneth Lewis says Merrill Lynch & Co. Inc. and Countrywide Financial Corp., the two acquisitions that some analysts say helped push down the bank's share price, have been "stars" so far this year.
Mr. Lewis said in an interview with Bloomberg News that Merrill will be "a thing of beauty" over the long term. The New York-based securities firm lost $15.8 billion in the fourth quarter.
The 61-year-old banker's views on the acquisitions contradict criticism by analysts such as Paul Miller of Friedman Billings Ramsey Group, who contend that the bank overpaid when it agreed in September to buy Merrill and took on excessive risk as it acquired Countrywide, formerly the largest U.S. home lender.
"I almost fell off my chair" after hearing Mr. Lewis' comments, said Michael Holland, who oversees $4 billion as chairman and founder of Holland & Co. in New York.
Five months after he agreed to buy Merrill and cap a four-decade career at the nation's largest banking company, Mr. Lewis is under pressure from investors and Congress to bolster his share price and increase lending. Mr. Lewis, the CEO since 2001, has said in internal memos and a letter to clients in recent days that B of A, the recipient of $45 billion in government said, does not need further help.
B of A, whose stock price was down as much as 11% earlier Wednesday, rose 13%, to $5.35 a share, at 3:07 p.m. "Everything we thought is playing out" with the Merrill purchase, Mr. Lewis said. Industry statistics show the company is gaining market share against Wall Street rivals, he said.
The government's plan to use "stress tests" to review the balance sheets of the 19 biggest banks will not pose a problem, Mr. Lewis said.
The company expects revenue to top $100 billion this year, he said, and Merrill and Countrywide are poised to become key profit contributors. Merrill had annual operating profit of $3.7 billion to $7.8 billion from 2001 to 2006, and Countrywide had profit of $3.6 billion to $4.3 billion from 2003 to 2006 as the housing market soared. B of A is cutting more than $7 billion of annual expenses as a result of the mergers, further boosting profit, Mr. Lewis said.
The Charlotte banking company lost $1.79 billion in the fourth quarter, excluding the Merrill loss. The bank cut its quarterly dividend to 1 cent, from 32 cents, on Jan. 16 to preserve capital.
Two former B of A CEOs on Wednesday praised Mr. Lewis' decision to buy Countrywide last year and said the government forced him to buy Merrill. Countrywide positions the bank "to take advantage of one of the few bright spots in the entire industry right now: the surging market for mortgage financing," Hugh McColl Jr. and Thomas Storrs said in the Charlotte Observer. Mr. Lewis also faces legal pressure. New York Attorney General Andrew Cuomo is investigating Merrill's $3.6 billion in bonus payments to employees in December, just before the merger closed. Mr. Lewis declined in Wednesday's interview to comment specifically on the Cuomo investigation, saying he expects to speak with the attorney general. The bank's directors, including Mr. Lewis, were accused in a Jan. 21 lawsuit filed by Jerry Finger, a Houston banker who owns 1.5 million shares, of failing to disclose the losses at Merrill before the deal closed Jan. 1. Mr. Finger sold his Charter Bank to Mr. McColl in 1996.