Ken Lewis, the embattled CEO of Bank of America Corp., is leaving the company, succumbing to nearly a year of strife that followed his company's acquisition of Merrill Lynch & Co.
The bank said in a statement late Wednesday that Lewis, 62, would retire as CEO and also leave the company's board by the end of the year. The company said his successor will be selected by the time he steps down Dec. 31.
The news, coming after shareholders hadearlier this year, wasn't surprising because of the heavy pressure he came under after the Merrill deal. Lewis had said he would stay on as CEO until after the company's financial problems were resolved, a process expected to take several years.
However, with the bank also under heavy criticism from government officials, Lewis was increasingly seen as vulnerable.
"He's had a big target on his chest for the whole Merrill Lynch deal, and I can only imagine the emotional stress he's endured" said Alan Villalon, senior research analyst at Minneapolis-based First American Funds, which owns Bank of America stock.
The deal was first questioned after it was learned that Merrill Lynch's losses were far more than expected, and Bank of America asked for and an additional $20 billion from the government, in part to offset those losses. The brokerage lost $15 billion in the fourth quarter and more than $27 billion for the year.
But Lewis came under even greater attack when it was learned the investment bank with the knowledge of Bank of America executives gave billions of dollars in bonuses to employees even as it asked for more bailout money from the government. The deal was forged a year ago at the height of the financial crisis and closed Jan. 1; the bonuses, which would normally have been paid in January, were moved up and paid out in December.
New York Attorney General Andrew Cuomo this month subpoenaed five members of Bank of America's board as part of an investigation into the Merrill deal.
Bank of America had settled a separate investigation last month into disclosures about the Merrill bonuses with the Securities and Exchange Commission, but a federal judge threw out that $33 million settlement, saying it was unfair and needlessly penalized the bank's shareholders. The judge ordered the case to go to trial Feb. 1.
The announcement raised the question of whether the government, which has been leaning on the company to revamp its board and its operations, sought Lewis' departure. Treasury spokesman Andrew Williams said the Treasury would have no comment.
A Bank of America spokesman didn't immediately respond to a request for comment.
Shares of Bank of America rose 23 cents to $17.15 in after-hours trading, after falling 24 cents to end the regular session at $16.92.
Investors may have some concerns over the lack of an immediate successor, but those will likely be temporary, Villalon said.
"They probably won't operate long without a CEO," he said. "If somebody comes from the outside, or even internally, it gives a set of fresh eyes."
Others said the bank would likely be pressed to quickly name Lewis' replacement.
"You can't leave a $3 trillion company in jeopardy without knowing who the CEO is until December," said Tony Plath, a finance professor at the University of North Carolina at Charlotte.
Lewis, who was appointed CEO in 2001, was already dealing with a barrage of criticism before the company's annual meeting on April 29, but he and other bank executives were nonetheless stunned when shareholders voted to separate the jobs of chairman and CEO. The questions of how long Lewis would be able to hold on to his job began in earnest that day.
Lewis had said he wanted to remain CEO until the government loan was repaid and Bank of America turns around its operations after the end of the recession. But that could have been years, as the company and other banks have warned that they would continue to suffer loan losses because so many consumers are strapped for cash or unemployed.
"Ken has been pummeled by the institutional investors, he's been pummeled by the government, he's been criticized by his new board. It's coming at him from all directions," Plath said. "There's no way he can continue in his role as CEO."