CHARLOTTE, N.C. – Bank of America Corp. Chairman and CEO Ken Lewis faced angry shareholders at the bank’s annual meeting Wednesday, and defended his company’s acquisition of Merrill Lynch & Co. — a deal that has many investors calling for Lewis’ dismissal.
The meeting at a theater near BofA’s Charlotte headquarters began late because so many attendees — including bank employees — were still streaming in at the 10 a.m. EDT scheduled start time. Security was tight and, as expected, there were protesters against Lewis outside the building.
Although big investors including California’s employee pension fund have called for shareholders to oust Lewis and his fellow directors at the meeting, the CEO was greeted by applause as he took the stage. In prepared remarks, he defended the company’s acquisition of Merrill and another troubled company, mortgage lender Countrywide Financial Corp.
Lewis said the companies are providing “the positive counterbalance to our traditional banking businesses, which at this point of the business cycle are under much more stress from rising credit losses.”
“Countrywide and Merrill Lynch are two of the most important reasons Bank of America is the most profitable financial services company in the United States so far this year,” Lewis said. “Today, I can state without reservation that these acquisitions are not mistakes to be regretted. Both are looking more and more like successes to be celebrated.”
The banking giant and Lewis have been under intense scrutiny because Bank of America is one of the biggest recipients of government support and because losses at Merrill turned out to be much higher than anyone expected.
Shareholders who have been calling for Lewis to resign or be dismissed as chairman and CEO are also irate over the precipitous drop in the company’s stock price. Bank of America has fallen 42 percent since the beginning of the year, closing Tuesday at $8.15. But shares fell as low as $2.53 in late February.
In his remarks Wednesday, Lewis said, “I know the Merrill deal has played a role in the decline of our stock price. But I do not believe it is solely responsible for its decline.” He said every major commercial bank in the country is under pressure.
A number of investment groups have campaigned for other shareholders to vote against the re-election of Lewis and other board members at the meeting. However, it is possible that at the meeting or at some point in the near future Lewis might lose his title as chairman while remaining CEO — a change that has been made at other troubled companies.
Bank executives likely knew how the vote was going ahead of the meeting, but preliminary results weren’t being released. The bank’s proxy statement shows shareholders are voting on 11 different proposals, including one regarding limits on executive compensation — a controversial topic for banks that received government funds.
Bank of America’s board has said it supports Lewis.
On his way into the meeting, shareholder John Moore, of Charlotte, said, “I think now is the time for Mr. Lewis to resign. We thank him and the board for their service.” Moore said he owns 18,000 shares in the bank.
On Tuesday, the California Public Employees’ Retirement System said it would vote against re-electing all 18 Bank of America board members, including Lewis. CalPERS, the largest U.S. public pension fund, holds about one-third of 1 percent the bank’s outstanding shares.
Bank of America has received $45 billion in government aid as part of the Troubled Asset Relief Program, and additional guarantees backing hundreds of billions more in risky investments after it took over Merrill Lynch in January.
On Tuesday, two people familiar with the matter said the Bank of America and Citigroup Inc. will need to raise more capital if they can’t convince regulators that “stress test” results were mistaken. Results of the tests, which are designed to determine if the banks can weather more economic turmoil, are expected to be released next week. BofA and Citi are preparing their appeals of the government’s assessment, said the people, who spoke on condition of anonymity because everyone involved in the process has been ordered not to discuss it
The government helped orchestrate the acquisition of Merrill Lynch over the same weekend in September that another investment bank, Lehman Brothers, collapsed, setting off one of the most intense periods of the financial crisis.
Bank of America completed its purchase of Merrill Lynch on Jan. 1. Since then, Bank of America has been under pressure from shareholders about the deal, especially as Merrill Lynch reported a more than $15 billion fourth-quarter loss just weeks after the deal was completed.