Bank of America Corp. Chairman and Chief Executive Kenneth Lewis purchased an additional 200,000 shares of the Charlotte, N.C., bank's common stock Wednesday, February 4, 2009, in his latest effort to convince employees, investors and the board that he and his management team can lead it out of its current crisis.
The bank's shares fell on Thursday, February 5, 2009, to their lowest level since October 1984, before rebounding to close at $4.84, up 2.98%. Analysts attributed the volatility to concerns about how involved the U.S. government is in the affairs of the nation's largest bank by assets.
Government officials played a heavy hand in Bank of America's acquisition of securities firm Merrill Lynch & Co., for which Mr. Lewis has been under fire. The stock's price improved once U.S. Sen. Christopher Dodd publicly dismissed speculation that the U.S. could soon nationalize Bank of America.
Last week, Mr. Lewis went before his directors in Charlotte for "the longest board meeting in anyone's memory," he told employees in a memo. "The board unanimously endorsed our business model, strategic direction and the team. The burden of execution and accountability, as always, rests squarely on our shoulders to vindicate their confidence in us."
He called the company's performance in January "encouraging." The "extreme dislocations in the capital markets we suffered last quarter seem to have moderated" but "credit costs continue to be a big issue."
Mr. Lewis acknowledged that year-end bonuses were cut across the company, with higher-ranking managers taking the largest "hits." In some cases, according to people familiar with the situation, bonuses are being distributed in chunks of deferred cash during 2009, with the first amount paid in March and the rest coming in installments over the course of the year.
The CEO's purchase of stock amounted to a payout of $958,340 and follows another pickup of 200,000 shares on Jan. 20. Mr. Lewis now owns more than 2.2 million Bank of America shares. Several other board members, including lead director Temple Sloan and retired U.S. Army General Tommy Franks, also picked up more than 216,000 additional shares in the last week.
Analysts debated Thursday, February 5, 2009, whether the bank could in fact be a candidate for nationalization. Raymond James analyst Anthony Polini called concerns about nationalizing Bank of America absurd. The stock has been driven so low that "fear itself does the work for you," he said. "After a while, even the most rational, intelligent investor starts to think, 'I must be wrong, there must be some truth to this, the stock keeps going down.'"
Fox-Pitt Kelton analyst Andrew Marquardt told clients that the bank's shares now reflect a worst-case scenario. He added that decisive actions are needed not only by the government, but also at Bank of America.
Bank of America declined to comment on the stock price, the likely effect of a new rescue plan or calls for management changes. Stocks surged Friday, February 6, 2009, on expectations that Washington could soon unveil solutions for the troubled financial sector and despite a dismal reading on the jobs market. Bank of Amerca closed up 3.75%, up $0.23 to $6.36 on Friday, February 6, 2009.
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