Ken Lewis, the embattled CEO of Bank of America Corp., is leaving the company, succumbing to nearly a year of strife that followed his company's acquisition of Merrill Lynch & Co.
The bank, America's largest by assets, said Wednesday that Lewis, 62, decided on his own to leave and would retire as CEO and also leave the company's board by the end of the year. The company did not announce a successor, saying one would be selected by the time Lewis steps down Dec. 31.
The fact that no succession plan was announced indicated that the Bank of America board did not expect Lewis' decision at this time. Nonetheless, the news, coming after shareholders had stripped Lewis of his chairman's title earlier this year, wasn't surprising because of the intense pressure he came under after the Merrill deal. Lewis had said he would stay on as CEO until after the company's financial problems were resolved, a process expected to take several years.
However, with the bank also under heavy criticism from government officials, Lewis was increasingly seen as vulnerable.
"He's had a big target on his chest for the whole Merrill Lynch deal, and I can only imagine the emotional stress he's endured " said Alan Villalon, senior research analyst at Minneapolis-based First American Funds, which owns Bank of America stock.
Bank of America spokesman Bob Stickler said Lewis wasn't asked to leave by the board or the bank's regulators.
"He made the decision himself," Stickler said, adding that Lewis informed the bank's board during an unscheduled meeting conducted by telephone Wednesday evening. "The board was surprised when Ken told them what he wanted to do."
Stickler said Lewis began thinking about stepping down after returning from vacation in August. Stickler said Lewis' decision was driven by the fact that the bank is in better shape to recover from the recession and because "I think he's just feeling a little burned out for pretty obvious reasons."
The Merrill Lynch deal was first questioned after Bank of America disclosed that Merrill's losses were far more than expected. Bank of America then asked for and got an additional $20 billion from the government, in part to offset those losses. The brokerage lost $15 billion in the fourth quarter and more than $27 billion for the year. Bank of America ultimately received $45 billion in government assistance.
But Lewis came under even greater attack after Merrill Lynch, with the knowledge of Bank of America executives, gave billions of dollars in bonuses to Merrill employees even as Bank of America asked for more bailout money from the government. The deal was forged a year ago at the height of the financial crisis and closed Jan. 1; the bonuses, which would normally have been paid in January, were moved up and paid out in December.
Months later, the criticism is still intensifying. New York Attorney General Andrew Cuomo in September subpoenaed five members of Bank of America's board as part of an investigation into the Merrill deal. Lewis' departure won't affect the investigation, Cuomo said in a statement.
Bank of America had settled a separate investigation last month into disclosures about the Merrill bonuses with the Securities and Exchange Commission, but a federal judge threw out that $33 million settlement, saying it was unfair and needlessly penalized the bank's shareholders. The judge ordered the case to go to trial Feb. 1.
Shares of Bank of America rose 23 cents to $17.15 in after-hours trading, after falling 24 cents to end the regular session at $16.92.
When the stock market peaked in October 2007, Bank of America stock was trading at about $53 a share. It then began a decline that accelerated with the financial crisis, and joined other big banks whose stocks fell into the single digits. Earlier this year, it fell to $2.53 a share before starting to recover.
Analysts said the bank would likely be pressed to quickly name Lewis' replacement.
"You can't leave a $3 trillion company in jeopardy without knowing who the CEO is until December," said Tony Plath, a finance professor at the University of North Carolina at Charlotte.
A possible candidate to replace Lewis is Brian Moynihan, head of the bank's consumer and small business banking unit, said Anthony Polini, an analyst at Raymond James who covers Bank of America.
Moynihan joined Bank of America in 2004 through the bank's acquisition of FleetBoston Financial. He served as president of Bank of America's global wealth and investment management operation before taking on his current role.
Another potential successor is Sallie Krawcheck, a former Citigroup chief financial officer who took over Moynihan's previous job in August.
Lewis, who was appointed CEO in 2001, was already dealing with a barrage of criticism before the company's annual meeting on April 29, but he and other bank executives were nonetheless stunned when shareholders voted to separate the jobs of chairman and CEO. The questions of how long Lewis would be able to hold on to his job began in earnest that day.
Lewis had said he wanted to remain CEO until the government loan was repaid and Bank of America turns around its operations after the end of the recession. But that could have been years, as the company and other banks have warned that they would continue to suffer loan losses because so many consumers are strapped for cash or unemployed.
"Ken has been pummeled by the institutional investors, he's been pummeled by the government, he's been criticized by his new board. It's coming at him from all directions," Plath said. "There's no way he can continue in his role as CEO."