Ken Lewis might think that Bank of America is poised to make mad money. But not so much everyone else.
Standard & Poor’s cut the megabank’s credit rating to A from A+, noting that the weak economy and the task of absorbing Merrill Lynch will eat into profits.
“Earnings pressure for Bank of America will be more intense than we anticipated as recently as Dec. 19,” analyst John Bartko wrote in a report today. Back in December S&P cut the rating down to A+.
The bank’s creditworthiness has deteriorated because of its large consumer lending business, and everyone thinks that smart consumers are pulling back on spending while the dumber ones will wind up not paying their credit card bills. We know what you’re thinking—what took S&P so long? Give them a break. They’ve been busy or something.
Oh, and then there’s the whole Merrill fiasco. Just today another set of Merrill employees defected to Deutsche Bank. So far, Bank of America has displayed almost no real knowledge of what the integration will take, the risks the firm faces and how on earth it can retain enough of the earners to not make the entire acquisition a huge waste of time and money.
Right now S&P is predicting that Bank of America will break even in 2009, a huge cut from its earlier prediction that the bank would earn before $10 to $15 billion. Bank of America saw its first lost in 17 years last quarter. We’re kind of wondering how S&P figured out that the losses would stop. If anything, we’d have thought that a conservative estimate would have Bank of America seeing a loss this year.
Ken Lewis totally thinks Bank of America will pay the $45 billion in Tarp bucks back in just a couple of years. So we’re guessing he thinks 2010 is going to be awesome.