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A well-known bank analyst has an unconventional and polarizing idea for Bank of America as it hunts for a new CEO: Bring back Ken Lewis.
Rochdale Securities analyst Dick Bove wrote a note to clients Friday saying he thinks the embattled Lewis could return for a second act. Bove, who has supported Lewis throughout the past year, says he believes that the bank's managers and large investors also want Lewis to return.
Lewis “knows this company better than anyone else and he knows how to operate it,” Bove wrote. “At this point in the company's history, this is the type of leader needed. Convincing him to return would be the biggest morale builder that management could get.”
A bank spokesman declined to comment.
Bove, who is widely quoted in national media and frequently appears on CNBC, has compared anger at Lewis to a witch hunt, saying the government and shareholders are irrationally trying to pin the entire financial crisis on Lewis. Though Bove blames Lewis for the bank's “outrageously high” loan losses, he also argues that Lewis is the person best qualified to run the large and complex Bank of America, and that losing him will ultimately hurt the bank and shareholders. Lewis, under fire for his Jan. 1 purchase of Merrill Lynch, surprised his board when he announced Sept. 30 that he would step down at year's end. The board is still hunting for a successor.
Bove's note on Friday echoed one that he wrote late last week, expressing his wish for Lewis' return. He noted the intense government scrutiny that Bank of America is facing, as it holds $45 billion in federal loans, and said that no outside candidate would be willing to take the salary cut or the government-related headaches.
Bove said the first note was just wishful thinking. But in Friday's note, he wrote, “I am beginning to believe that Mr. Lewis could in fact be back.” He said that anecdotal conversations with bank managers and large investors lead him to believe that they also support Lewis' return.
But defending Lewis will win an analyst as many enemies as friends: The day after Bove's first note, analyst Tom Brown shot back with a posting on Bankstocks.com, writing, “Dick, have you gone crazy?”
“Ken Lewis will be remembered as (a) terrible CEO who drove his company into the ground, then left behind a senior management without a single individual capable of picking up the pieces,” Brown continued. He is a longtime critic of Lewis and Bank of America.
Jon Finger, whose Houston investment firm has lobbied against Lewis throughout the year, disagreed with Bove's statement that large investors want Lewis back.
“We have not heard of any investor that wants Ken Lewis brought back,” Finger said Friday. “To the contrary, the investors we have spoken to have all expressed a preference for someone from outside the company.”
Finger is also pushing for an outsider to take over the bank, which would likely be a signal that the bank is breaking ties with the Lewis era. Finger also said that Lewis might be too burned out for such a demanding job. “Does he really have a burning desire to stay there? I think that he doesn't,” Finger said. “And that's a critical issue.”
When Lewis announced his resignation, a person close to him said he had become fatigued by the “mud being thrown on him day by day.”
It's not clear if regulators would allow Lewis to return. It's expected that the bank's regulators will have an informal veto over the board's choice for CEO.
The bank's board of directors has been criticized for not having an immediate successor in place, and it's unclear when they might name a new CEO. The suspense is especially high in Charlotte, where the bank is one of the largest employers and an important engine in philanthropy and prestige.
When Lewis announced his resignation, the bank said the board would ensure that a successor was named by Lewis' last day, Dec. 31. Last week, a bank spokesman said the bank expected to name a new CEO by Thanksgiving. Friday, he said the decision was expected “around” Thanksgiving.
Lewis has never been known for his congeniality, which may have contributed to some of the attacks he's now enduring. He's facing lawsuits from angry shareholders who think they were misled into voting for the Jan. 1 purchase of Merrill, a March trial with the Securities and Exchange Commission over disclosures related to the deal, and investigations by the New York and N.C. attorneys general.
But Lewis also is widely regarded as a smart and talented bank manager, securing Bank of America's position as the country's largest during his eight years as CEO. He's fiercely loyal to the company, having spent his entire career there. Born and raised in the South, he repeatedly expressed his intentions to keep the bank's headquarters in Charlotte, even as it grew into an international player.
Analyst Bove was not the first to raise the possibility of a Lewis reincarnation. On Oct. 9, a little more than a week after Lewis announced he would resign, satirical columnist Philip Maddocks wrote a piece titled, “Board of directors stunned to learn it rehired Kenneth Lewis.”
In his fictional story, Maddocks wrote: “Mr. Lewis said the board began thinking about rehiring him while he was on vacation in Aspen, Colo., on Tuesday, according to the sources briefed on the board's decision. He surprised colleagues when he returned to work sporting a beard and a Mohawk, something no one could remember him doing in decades.”
Lewis' resignation did come soon after a vacation in Colorado. And he did return with a beard, but not a Mohawk.
Maddocks is a Massachusetts-based editor for the GateHouse News Service chain of newspapers. In an e-mail to the Observer, he noted how it's becoming progressively more difficult to draw the line between satire and reality.
“Reality has become a worthy adversary,” he wrote.
