Here's Bank of America's CEO discussing his firm's announced massive earnings shortfall, dividend cut, and issuance of yet more dilutive stock.
"It’s a damn disaster," Chief Executive Officer Kenneth Lewis told analysts, when asked about lending conditions. "We are making every good loan we can find" but "it’s not going to be pretty for awhile." (link)
But they seem to BUYING up every bad loan they can find! See CountryWide and Merrill Lynch.
The stock cratered 8.45 yesterday to 23.77. And it's trading at 21.50 in the pre-market right now.
Click the chart to enlarge.
So share prices are at a 12 year low and Ken Lewis still hasn't been fired. It's absolutely unbelievable. Apparently there are no standards for his job performance. Read my prior post on Bank Of America's derelict Board of Directors. And then read my other Lewis screed from three months ago. If you're too shiftless to bother, here's the money quote:
Bank Of America Corp's CEO Ken Lewis said something last month that might render insight into his derangement. Via the Bank's spokesperson Robert Stickler:
"Mr. Lewis went through a number of scenarios and indicated that we feel the most likely scenario is one in which the economy does not deteriorate significantly," said Stickler, who attended the meeting with Whitney. "In that scenario, we wouldn't have to cut the dividend."
Okay, the dividend has been cut. AND the economy has deteriorated significantly. Well done Nostradamus!
If the board had fired Ken earlier this year - instead of taking solace in a phantom, fraudulent stock bounce from $18 a share - if they had removed Lewis earlier they might not be embroiled in this misguided takeover of Merrill Lynch.
This Merrill deal stinks for BoA shareholders. Elaboration will be forthcoming. (unless I forget)
7 comments:
So we concede the [leftist] point that boards & mgt do not represent the interests of shareholders?
Yeah, I know, they should all be fired. Not gonna happen.
Ditto for the Wall St. morons you've marginalized.
I guess I could get over the back strain brought on by hauling my golden parachute out to my pad in the Hamptons too.
Seriously, when will the markets do the jobs we've set for them -- if ever?
Anon,
If boards and mgmt don't serve shareholders, shareholders should divest. Pretty simple incentive structure.
Short away, kimosabe!
Article I thought you might find interesting. The bit that was most notable to me was page 9, 1st paragraph:
http://www.changethis.com/51.05.AttitudeProblem
Lazy, passive, entitled-to-returns investors are THE major problem.
At least Ken Lewis sold $61 million of his BAC shares before the massive stock drop. (I know, he has plenty more.) With his horrible overpriced Merrill deal, he'll now be able to issue himself new options at practically nothing. Is there a Board at Bank of America? If so, it must the the most ineffective in the world.
Will BAC's insane acquisitions of Countrywide and Merrill cause BAC to follow in Citi's footsteps:
http://www.reuters.com/article/peopleNews/idUSTRE4AO3UR20081125
From New York Times, November 27, 2008
By ROB COX and ROBERT CYRAN
Published: November 27, 2008
Let us give thanks to Bank of America shareholders for taking one for the team. That’s what they’ll essentially be doing, assuming they greenlight the bank’s takeover of Merrill Lynch next week, as seems likely.
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By almost any measure, Merrill will not be worth remotely as much as Bank of America, the bank run by Kenneth D. Lewis, agreed to pay in September. So it might be tempting for shareholders to vote against the deal when they meet on Dec. 5.
Trouble is, after the latest bailout of Citigroup — and multiple attempts to stabilize Morgan Stanley, Goldman Sachs and other former investment banks — voting down the merger would deliver another terrifying shock to the financial system.
Merrill, after all, was scooped up by Bank of America in an all-stock deal on the same Sunday that Lehman Brothers was forced to file for bankruptcy, beginning a downward spiral that has buffeted markets around the globe.
Had John A. Thain, Merrill’s chief executive, not agreed to sell, the firm would almost certainly have been the next target of the so-called fear trade. With Merrill safe, Morgan Stanley bore the brunt of the market’s panic.
Since the deal was announced, shares of Goldman and Morgan Stanley have tumbled 50 percent and 61 percent, respectively. Merrill’s have fallen just 28 percent. On its own, Merrill would almost certainly have fared worse, given the toxic assets on its balance sheet and a run by some clients in the weeks leading to its rescue by Bank of America.
So in hindsight, Bank of America’s bargain looks expensive. Shares of its main banking rivals — Wells Fargo, U.S. Bancorp and JPMorgan — are down 16 percent, 22 percent and 26 percent, respectively, an average decline of 21 percent. Bank of America’s stock has shed a stunning 54 percent of its value since the day before the Merrill deal.
That decline of 33 percentage points beyond the losses seen by Bank of America’s peers equates to more than $50 billion of its market cap that has evaporated.
Not all of that decline is attributable to Merrill. Bank of America also acquired Countrywide Financial, one of the biggest mortgage banks during the go-go years but one that is now in distress. It does show, however, why Bank of America shareholders’ support for the deal might at best be grudging. At least they can rest easy knowing they may have averted yet another leg to the crisis.
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