Ken Lewis, chief executive officer and president of Bank of America Merrill Lynch, surprised markets on Wednesday with an announcement that he will retire effective December 31. In addition to his executive roles, Lewis will also relinquish his directorship on the BoA board.
Lewis said in a written statement announcing his departure he felt the time was right for BoA to transition to a new leadership, given that the bank is "well positioned to meet the continuing challenges of the economy and markets". In a second-quarter earnings call on July 17, Lewis referred to the fact that operating conditions for the bank were improving, according to a transcript posted on seekingalpha. For the first time in a while, we feel less constrained by economic events and more capable of demonstrating progress and momentum, he said on the call.
Lewis is a BoA veteran. He joined the Charlotte-headquartered bank in 1969 and became CEO in 2001.
"The board will be moving in a deliberate and expeditious manner to select a worthy successor to Lewis," said Walter Massey, chairman of the board of directors at BoA, in the statement. Massey was appointed chairman of BoA earlier this year when Lewis relinquished the post in an attempt to appease enraged shareholders.
Some specialists suggest the fact that succession is not in place indicates that Lewis's announcement came as a surprise to the board.
This is in contrast to recent announcements by rival Wall Street investment banks Morgan Stanley and J.P. Morgan. Morgan Stanley said earlier this month that current co-president James Gorman will become CEO on January 1 next year when current chairman and CEO John Mack will give up the CEO role. Mack will continue as chairman for two more years. Meanwhile, J.P. Morgan announced on Tuesday that Jes Staley, currently head of asset management, will become CEO of the investment bank -- a move perceived by specialists as putting him in line for the top job at the US firm. "With the credit crisis largely behind us and the economy recovering, the timing was right to begin the succession process," said Jamie Dimon, chairman and CEO of J. P. Morgan in a written statement announcing the move.
The statement issued by BoA on Wednesday did however refer to the changes to the executive management committee which Lewis announced on August 3 as having "increased the depth, range and diversity of experience of Bank of America's leadership team", suggesting Lewis could have positioned internal candidates for his job.
"These changes also position a number of senior executives to compete to succeed me at the appropriate time," Lewis said at the time. However, the August reorganisation saw two candidates who are relatively new to BoA take on senior roles and some specialists felt that the CEO job was unlikely to be entrusted to someone without a reasonable length of history at the firm.
BoA announced in August that Sallie Krawcheck will join BoA to run the global wealth and investment management business. Krawcheck was previously CEO of global wealth management at Citi which included Smith Barney, the Citi private bank, and also the Citi equity research division, until late 2008 when she resigned. She was chief financial officer of Citi between 2004 and 2007. Some analysts have commented that it was under Krawcheck's watch as CFO that Citi's balance sheet grew weaker as a result of subprime-related exposure. Krawcheck joined Citi in 2002 as chairman and CEO of Smith Barney.
At the same time, Brian Moynihan took over as head of consumer banking at BoA, which some specialists say is the bank's most important portfolio, entrusted to him so that he would have a holistic understanding of various parts of the BoA machinery. Moynihan now oversees BoA's deposits, small business and card businesses as well as the retail network. He was earlier head of corporate and investment banking (CIB) and wealth management. Moynihan took back the CIB and wealth management portfolios in January when John Thain, the former CEO of Merrill Lynch, was ousted from the merged entity. Moynihan had become general counsel for BoA, after he relinquished his role as head of CIB to Thain. He joined BoA in 2004, following its merger with FleetBoston Financial. At Fleet, he led brokerage and wealth management.
Tom Montag who heads global markets added Moynihan's CIB portfolio to his job in August. Montag was promoted to become a member of BoA's management executive team in January, when Thain resigned. He joined Merrill Lynch as executive vice-president and head of global sales and trading in 2008, before the bank was taken over by BoA. He was earlier co-head of the global securities business and a member of the management committee at Goldman Sachs, where he spent 22 years.
Whoever takes over the top job at BoA -- be it Krawcheck, Moynihan, Montag or some other candidate -- will continue to have battles to fight. Since the beginning of this year Lewis has been defending the deal he struck to take over Merrill Lynch at the height of the financial crisis in September last year. At the heart of the controversy is the bonus payouts of $3.6 billion that Merrill Lynch paid to its employees in December last year. Lewis is also answering to criticism about whether BoA shareholders were short-changed by inadequate disclosures regarding Merrill's impending $11 billion losses and its plans to pay bonuses in spite of the losses.
In September the office of the New York attorney general Andrew Cuomo told BoA's counsel that attorney-client privilege was not enough reason for the lawyers to withhold details being sought regarding the bonus payouts and that BoA officers face legal charges. On Wednesday, Cuomo's office issued a terse, one-line statement saying "Ken Lewis's decision to step down will have no impact on [its] continuing investigation".