Bank of America Corp. chief executive officer Kenneth Lewis said Wednesday that he expects more mergers among U.S. banks as the economy stabilizes but said his company will not be among the participants.
"Merger activity will pick up for others," Lewis said in speech in London. "At Bank of America, we've got enough on our hands right now."
Lewis, who has spent more than $120 billion on acquisitions since becoming CEO in 2001, is still trying to quell investor doubts about his most recent purchases, which led to his ouster as chairman last month. The Charlotte banking company bought the giant home lender Countrywide Financial Corp. last July and the Merrill Lynch & Co. brokerage in January as the financial industry was teetering near collapse.
The recession and credit crunch left the U.S. banking system with too much capacity, making absorption of weaker banks by stronger ones inevitable, Lewis said. Consolidation stalled in the past year, however, as "severe market stress and disruptions made pricing difficult," he said.
Among the company's largest competitors, Wells Fargo & Co. in San Francisco agreed to buy Wachovia Corp. last fall as the Charlotte-based lender faced bankruptcy, and JPMorgan Chase & Co. acquired the banking operations of Washington Mutual Inc. after the Seattle thrift failed.
B of A was one of 19 lenders stress-tested by regulators to see how they would fare in an extended recession. Lewis reiterated that the worst economic scenario used in the tests reflects a deeper slump than most economists expect.
"The outcomes described in the Fed's report are much, much worse than anything that is likely or anticipated at this point," he said. B of A "fell short in the worst-case scenario in the Tier 1 common equity position of our total capital base. So the need isn't for additional capital; it's for a different mix in the capital structure."
Regulators told B of A to raise $33.9 billion, the biggest increase among the 19 banks tested. The tests assumed an average U.S. unemployment rate of 10.3% in 2010, compared with economists' consensus estimate of 9.3%, Lewis said. The April rate stood at 8.9%.
He also disputed the stress-testers' estimate of a potential 5.7% loss rate in its home-loan business. The rate in the first quarter "would have to more than double and then be sustained at that stratospheric level for seven more consecutive quarters," he said.
Lewis said he expects a "slow but sustainable economic recovery" in the second half, with growth in the United States and Europe. "The worst is most likely behind us," he said.