Thursday, October 01, 2009

Ken Lewis Resigns!

It's official! Ken Lewis announced yesterday that he will the end of this year.

This has touched off a huge debate all morning long on CNBC regarding Lewis' legacy and merit. Due to co-anchors Becky Quick and Joe Kernen being absent, this unfortunately left resident idiot Steve Liesman free to run at the mouth about more things about which he knows far too little.

But perhaps the best exchange was very early in the morning, before 7AM, when longtime bank analyst Dick Bove fenced with another banking sector pundit over Lewis' merits.
Bove, ever the apologist and cheerleader for all things banking, championed Lewis as the architect of the current BofA.
His opponent, a large BofA institutional shareholder, more correctly noted that former NationsBank CEO Hugh McColl was primarily responsible for assembling the bulk of BofA, including the merger with that formerly California-based bank in 1988.
Bove claimed the shareholder was factually in error, but, from what I heard, Bove was the one who had his facts wrong.
The nearby price chart for BofA, Chase, Citigroup and the S&P500 Index provides some assistance in assessing Lewis' performance.
What's interesting to me is that, over the 20+ year period shown, from 1985-present, BofA has rarely consistently outperformed the Index. In fact, as I expected, only Citi, briefly, actually outperformed on a consistent basis.
By the time Lewis took over BofA in 2001, the bank had actually underperformed the S&P since 1985. The price trajectory under Lewis was pretty flat, if slightly upward, mostly mirroring the S&P, until, of course, last year.
Certainly, nothing in BofA's share price performance suggests Lewis did an exemplary job as CEO, Bove's sputtering to the contrary.
The apparent hot topic of discussion regarding Lewis' departure is whether the board conspired to bring it about. If they didn't, why not?
Lewis' murky behavior in last year's purchase of Merrill Lynch, for which he overpaid with his shareholders' money, then failed to inform them of material facets of the deal, would be sufficient to have dismissed him. It doesn't help that Lewis has gone on to tell different things to different audiences regarding who told him to do what during that deal.
If Lewis had led BofA to a clearly consistently superior total return performance during his eight years at the helm of the bank, this debate might be understandable. But he didn't.

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