Lewis to step down as CEO; Moynihan's prospects unclear
Bank of America Corp. chief executive Kenneth Lewis’s unexpected decision to retire in a few short months appears to complicate Boston banker Brian Moynihan’s efforts to become head of the nation’s largest bank, an industry analyst said yesterday.
Late yesterday, Bank of America announced that Lewis, who had been CEO for eight years and was three years from mandatory retirement age, would step down in three months, at the end of this year.
Lewis had been under fire from politicians and regulators in Washington and New York for how he handled the bank’s $50 billion acquisition of then tottering investment company Merrill Lynch, although in a statement Lewis would only say that “now is the time to begin to transition to the next generation of leadership at Bank of America.’’
Lewis’s decision was so unexpected that board members did not even know he was retiring until just a few hours before the announcement, according to Bank of America director and longtime Boston banker Charles K. Gifford. He said Lewis told board members yesterday afternoon: “It’s time. I love the company, but it’s time.’’
Among possible candidates to succeed him is Moynihan, who was general counsel at FleetBoston Financial under Gifford before it was sold to Bank of America in 2004. He then held a variety of important posts at Bank of America until seven weeks ago, when he was promoted to oversee its largest single unit, its vast consumer banking division, with 6,100 branches and 53 million customers.
At the time, banking specialists said the promotion put Moynihan in a prime position to audition as Lewis’s successor. The assumption was that Lewis would remain in his post for two or three years, giving Moynihan time to prove his mettle.
“My thought was that would be finishing school for him,’’ said longtime Bank of America watcher Nancy Bush, who analyzes stocks of financial firms for investors. “Obviously, that’s not happening.’’
Instead, Lewis’s remaining months won’t give Moynihan enough time at his new job to show the directors he deserves to be CEO, Bush said. “To me, they will have to look for someone outside the company who is going to be a placeholder for a few years until Brian has become more seasoned. Or they may actually go outside and look for a permanent successor,’’ she said.
The bank’s directors yesterday said they intend to name a successor by year-end. Gifford said it’s premature to speculate on who that will be. When asked about Moynihan’s chances for the job, Gifford said, “There are many folks within the bank that are very able, including Brian.’’
Gifford said the board was so unprepared for Lewis’s announcement that it hadn’t taken any steps to begin looking for a successor, such as lining up an executive search firm.
Lewis’s announcement may have been driven by his and the bank’s growing problems over how it handled the Merrill Lynch acquisition a year ago.
New York Attorney General Andrew Cuomo has taken testimony from Lewis under oath, and subpoenaed Gifford and the bank’s 14 other directors as part of an investigation into whether the officials misled investors about the size of mounting losses at Merrill at the time of the announced acquisition, and withheld information that Merrill planned to pay its employees as much as $5.8 billion in bonuses.
A person briefed on Cuomo’s investigation recently told the Globe that the attorney general is considering filing civil fraud charges against the bank’s top executives as early as this month.
Separately a federal judge in New York earlier this month threw out a proposed settlement the bank had struck with the US Securities and Exchange Commission over the Merrill matter, ruling that it was unfair to shareholders and failed to establish the truth about the acquisition.
Steven Syre can be reached at syre@globe.com; Todd Wallack can be reached at twallack@globe.com. 
