Updated from 1:26 p.m. EST
Bank of America
CEO Ken Lewis is recommending that he and other top executives should not receive bonuses for 2008, as the bank's earnings will be below expectations, according to media reports citing an internal memo.
The Charlotte, N.C.-based bank's board still has to verify Lewis' recommendation, the reports said.
Analysts polled by Thomson Reuters, on average, forecast fourth-quarter earnings of 15 cents per share on revenue of $20.9 billion, and 2008 earnings of $1.23 per share on revenue of nearly $78 billion. Bank of America is expected to report earnings Jan. 20.
Lewis confirmed the decision in an email sent to his eight direct reports Tuesday afternoon. Bank of America spokesman Scott Silvestri confirmed Lewis' actions and recommendation to
The Associated Press
The move puts Lewis on a long list of CEOs in the U.S. financial services industry to decline bonuses this year, including top executives at
CEO John Thain also declined a bonus earlier this year. He became president of Bank of America's global banking, securities and wealth-management division when the acquisition closed.
The report is the second setback for BofA in 24 hours, though its shares were still up Tuesday. Late Monday, the bank announced the surprise departure of Bob McCann, head of
brokerage unit. The departure fuels critics who say BofA won't be able to retain the acquired investment bank's heralded "thundering herd."
Merrill's team of more than 16,700 financial advisors in 750 offices around the world is frequently cited as the major reason BofA made the acquisition, which closed Jan. 1. However, there have been concerns Merrill's best brokers would leave BofA, where they might be compensated less and generally viewed as less important to the overall mission of the company.
"It demonstrates that it will be difficult for Bank of America to hold onto Merrill's top producers," says Andrew Seibert, portfolio manager at Pittsburgh-based Nextier Wealth Management, of McCann's exit. Though Seibert is lukewarm about the acquisition in general, stating "it probably doesn't hurt," he owns BofA shares on the theory that the bank will benefit from being among the survivors of the current crisis.
One executive close to BofA believes McCann's departure is of little import, arguing Merrill brokers have few if any real options available to them in a bleak financial services environment.
Dan Sontag, who had been a McCann deputy as head of Americas Wealth Management, will replace McCann, according to an internal memo sent to employees by Thain, who also had announced McCann's plans to staff in a memo, according to
The Wall Street Journal
reported tensions between Thain and McCann. The tension, according to one Merrill executive, was visible in a company-wide video presentation following the merger announcement.
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