Ken Lewis sent out an internal memo explaining why Bank of America is much healthier than “our competitors,” which obviously means Citi. And although it’s officially an “internal memo” that just becaues there are legal constraints about what a chief executive can publicly say about the future prospects of his company. It was obviously written for public consumption. And we wouldn’t be surprised if it was leaked to Dan Fitzpatrick, who covers Bank of America for The Wall Street Journal, on Lewis’s instructions.
Here’s the memo, courtesy of DealJournal:
I want to address any questions about Bank of America that may be arising as a result of the news that at least one of our competitors is now in discussions with the government to negotiate an enhanced public stake in their company.
I have said repeatedly that our company does not need further assistance today and I don’t believe we’ll need any more in the future. That includes the potential conversion of the government’s preferred shares into common shares that would dilute existing shareholders.
You may have read that the first step in the government’s broader plan to assist the banking industry will be a series of “stress tests” to evaluate the current financial condition of banks and their ability to withstand various economic scenarios. We are constantly running our own stress tests, which continue to show that our capital and liquidity are sufficient to meet today’s economic challenges, as well as economic scenarios that include much higher unemployment rates than we have today.
The final point I want to make is that our business prospects and financial condition are far superior to those of most of our competitors. Bank of America’s overwhelmingly large deposit base, our consumer and commercial customer base, and earnings power give us a great advantage over banks that have been more badly damaged in the current crisis.
In 2008, we made more than $4 billion, while others posted billions in losses repeatedly over the past year. While I would not want to try to predict how much we’ll earn in 2009, we do expect to have revenues of more than $100 billion. Our tangible common equity ratio is currently about 2.68%, very close to investors’ standard threshold of 3.0%. Some of our competitors who are experiencing greater stress have ratios that are about half that threshold.
As I said last Friday, we continue to be profitable, our capital and liquidity are strong and we are actively lending in every sector of the marketplace. We need to help keep these facts straight in the public debate as the market appears to be moving in part based on rumour, innuendo and falsehoods propagated by the misinformed.