Analyst: Replace Ken Lewis with … Ken Lewis

Published Nov. 20, 2009 at 8:25 p.m.

A well-known bank analyst has an unorthodox solution for Bank of America's CEO search: bring back Ken Lewis.

Dick Bove, an analyst with Rochdale Securities, wrote a note to clients this morning saying he thinks the embattled Lewis could return for a second act. Bove, who has supported Lewis throughout the past year, says he believes that the bank's managers and large investors also want Lewis to return.

Lewis “knows this company better than anyone else and he knows how to operate it,” Bove wrote. “At this point in the company's history, this is the type of leader needed. Convincing him to return would be the biggest morale builder that management could get.”

A bank spokesman declined to comment.

Bove, who is widely quoted in national media and frequently appears on CNBC, has compared anger at Lewis to a witch hunt, saying the government and shareholders are irrationally trying to pin the entire financial crisis on Lewis. Though Bove blames Lewis for the bank's “outrageously high” loan losses, he's also argued that losing Lewis will ultimately hurt shareholders, since Lewis is the person best qualified for running the large and complex Bank of America.

Lewis has never been known for his congeniality, which may have contributed to some of the ire he's now facing. But he's widely regarded as a smart and talented bank manager, building Bank of America into the country's largest bank during his eight years as CEO. He's also fiercely loyal to the bank, after spending his entire career there, and was committed to keeping its headquarters in Charlotte.

Lewis has been under fire for his Jan. 1 purchase of Merrill Lynch. He's facing lawsuits from angry shareholders who think they were misled into voting for the deal, a March trial with the Securities and Exchange Commission over disclosures related to the purchase, and investigations by the New York and North Carolina attorneys general. When he announced his resignation, a person close to him said he had become fatigued by the “mud being thrown on him day by day.”

Bove wrote a similar note to clients last week, expressing his wish for Lewis' return. He noted the intense government scrutiny that Bank of America is facing, as it holds $45 billion in federal loans, and said that no outside candidate would be willing to take the salary cut or the government-related headaches.

In today's note, Bove said his previous posting was just wishful. Now, however, “I am beginning to believe that Mr. Lewis could in fact be brought back,” Bove wrote. He said that anecdotal conversations with bank managers and large investors lead him to believe that they also support Lewis' return.

But defending Lewis is a schismatic position: Four days after Bove's first note, analyst Tom Brown shot back with a posting on Bankstocks.com, writing, “Dick, have you gone crazy?”

“Ken Lewis will be remembered as a terrible CEO who drove his company into the ground, then left behind a senior management without a single individual capable of picking up the pieces,” he continued.

Brown has long criticized Bank of America, saying that its acquisitions under Lewis and predecessor Hugh McColl Jr. have diluted the bank's value and hurt shareholders.

Jon Finger, whose Houston investment firm has lobbied against Lewis this year, disagreed with Bove's statement that large investors want Lewis back.

“We have not heard of any investor that wants Ken Lewis brought back,” Finger said. “To the contrary, the investors we have spoken to have all expressed a preference for someone from outside the company.”

Finger is also pushing for an outsider to take over the bank, which could signal a new start and break ties with the Lewis era. Finger also said that Lewis might be too burned out for such a demanding job. “Does he really have a burning desire to stay there? I think that he doesn't,” Finger said. “And that's a critical issue.”

In October, in his last earnings call with analysts, Lewis noted how he'd spent two-thirds of his life at Bank of America and said he “just thought it was the appropriate time” to leave.

“I always thought I would intuitively know that, and I did,” Lewis said. “Forty years with the same company and eight years as CEO was enough.”

The bank's board of directors has been criticized for not having a successor in place immediately, and it's unclear when they might name a new CEO. The suspense is especially hard to bear in Charlotte, where the bank is one of the largest economic drivers of the economy and philanthropy.

Last week, a bank spokesman said the bank expected to name a new CEO by Thanksgiving. Today, he said the decision was expected around Thanksgiving.

Lewis' last day is scheduled to be Dec. 31. When he announced his resignation, the bank said the board would “continue ongoing planning to ensure his successor is selected by that date.”

Analyst Bove was not the first to raise the possibility of a Lewis reincarnation. On Oct. 9, a little more than a week after Lewis announced he would resign, satirical columnist Philip Maddocks wrote a piece titled, “Board of directors stunned to learn it rehired Kenneth Lewis.”

In his fictional story, Maddocks wrote: “Mr. Lewis said the board began thinking about rehiring him while he was on vacation in Aspen, Colo., on Tuesday, according to sources briefed on the board's decision. He surprised colleagues when he returned to work sporting a beard and a Mohawk, something no one could remember him doing in decades.”

Lewis' resignation came soon after a vacation in Colorado. He did return with a beard, but not a Mohawk.

Maddocks is a Massachusetts-based editor for the GateHouse News Service chain of newspapers. In an e-mail to the Observer, he noted how it's becoming progressively more difficult to draw the line between satire and reality.

“Reality has become a worthy adversary,” he wrote.

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