Bank of America CEO Ken Lewis (BAC) tried to calm the troops yesterday, sending out the following memo.
We doubt he’s right about not needing more capital, and we see plenty of reasons for Bank of America to be seized. We also still think Ken Lewis should be fired for destroying his shareholders by buying Merrill Lynch and Countrywide.
But, that said, this is a good memo. Lewis strikes the right balance of acknowledging reality without sounding blustery or out to lunch. He also tempers the usual they-don’t-get-it insult of investors who drove his stock below $4 yesterday, while quietly the brandishing the threat that nationalizing Bank of America will destroy the economy. (It won’t, but this threat is effective, because it scares the hell out of people). And if the credit markets really have loosened up over the past six weeks, that’s good news for everyone.
Memo from the WSJ’s Deal Journal:
Rough week for stock, good week for business
To my teammates:
Public debate on the subject of potentially nationalizing some banks continues to put great pressure on our stock. And yet, our company continues to be profitable. I see no reason why a company that is profitable, with capital and liquidity levels that are very strong, and that continues to lend actively, should be considered for nationalization. Speculation about nationalization is based on a lack of understanding of our bank’s financial position as well as a lack of appreciation for the adverse ramifications for our customers and the economy.
Bank of America does not need any further assistance today, and I am confident we will not need any further assistance in the future. I believe our company has more than enough capital, liquidity and earnings power to make it through this downturn on our own from here on out.
[If this were a parlor game, we’d love to bet Lewis a dollar that he’s wrong and then let the whole game play out. We’re confident we’d win. Unfortunately, this isn’t a parlor game. And American taxpayers have every right to make their own judgement about the viability of Bank of America.].
There is no question that the recession is continuing to worsen and that rising credit costs will continue to put great pressure on our ability to generate earnings. But here’s the good news: Your hard work is producing results in businesses all across the company.
While I can’t divulge any specific financial results mid-quarter, I can tell you that activity in our trading business continues to be vastly improved over last quarter. The corporate debt markets are showing some signs of thawing in both high yield and high grade, and we’re already seeing some benefits in the market of our combination with Merrill Lynch, in terms of winning mandates to raise capital for new and existing clients. And Merrill Lynch Financial Advisors posted nearly a half billion dollars in CD sales in the first four weeks these products were available to their clients.
On the retail side, our customer satisfaction scores are up at a time when others are down. Our brand, which took a beating in January, strengthened in early February, as customers gave us high marks for trustworthiness and perception that money is safe with us. In the first week of February, our Go America, Save! promotion boosted CD sales 18% and IRA sales 10% over the prior week. We extended our industry record this week for number of active mobile banking customers, surpassing the 2 million mark. And this week, a consortium of banks, including Bank of America, launched the Help With My Credit campaign to raise awareness of the different ways credit card issuers can assist customers in managing their financial obligations.
I am really encouraged by what we’re seeing in our home lending business. The mortgage boom is so intense we actually pulled down some advertising for a brief period to give our teams a chance to catch up to the volume, but they are running at full tilt now and processing record volumes. Our decision to acquire Countrywide has put us in a great position to capitalise on the surge in this business. This is a very positive story as we lead up to the launch of our new Bank of America Home Loans brand in April.
Yesterday, I met with a group of about a hundred of our top leaders to discuss what’s going on in the businesses and listen to their thoughts and concerns. We talked about the great challenges we’re all facing in the marketplace. But we also talked about how encouraging it is to work with such strong teammates, to have the trust and support of our customers and clients, and to have the position in our markets that we do.
As we concluded the meeting, I told them that we have a clear challenge in front of us: to prove the cynics and the critics wrong. I know we can do that – in fact, I think we’re doing it now, in the work each of you is doing every day, and the business results you’re putting up on the board.
Thank you for that. Let’s keep the momentum going.
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