March 12 (Bloomberg) -- Bank of America Corp., the biggest U.S. bank, expects to make money for the full year after posting a profit for January and February, Chief Executive Officer Kenneth Lewis said.
“We have been profitable for the first two months of the year,” Lewis told reporters after a speech to the Boston College Chief Executives’ Club in Boston today. “We expect to be profitable” in 2009. In his speech, Lewis said the bank may earn $50 billion this year, measured before taxes and provisions, and the company won’t need more federal aid.
Lewis becomes the third CEO at the nation’s biggest banks to report his company was profitable in the early part of this year, joining JPMorgan Chase & Co. and Citigroup Inc. He has promised the Charlotte, North Carolina-based bank will get through the credit crunch without more help from U.S. taxpayers.
The bank’s stock rose for a fourth straight day in New York Stock Exchange composite trading, advancing 92 cents, or 19 percent, to $5.85 at 4:02 p.m. Lewis said in today’s speech he expects revenue to top $100 billion this year.
Bank of America and its units accepted capital and guarantees from the federal rescue program valued at $163 billion and the bank posted a $1.79 billion fourth-quarter loss. Bank of America’s aid package was expanded in January after losses from newly acquired Merrill Lynch & Co. spiraled beyond what Lewis expected.
Returning Capital
Lewis said in his remarks the bank is in a “hurry” to return the U.S. capital and escape the government-imposed restrictions, with the timing tied to an overall economic recovery. The first sign of such a rebound will come from home prices, he said.
“At some point we’ll see housing prices stabilize and that would reignite the market,” he said. Lewis said he would pay particular attention to California, which he called “the poster child of the housing decline.”
Lewis said he expected lawmakers would provide companies with relief from accounting rules that require companies to value securities every quarter to reflect market prices.
“It seems to be common sense,” he said. “I think there is a solution that meets the accounting stance and shareholders’ stance.”
No to Nationalization
While Lewis in his speech praised the government’s Troubled Asset Relief Program, known as TARP, for preventing a financial system “meltdown” and boosting lending, he opposed calls from some analysts and lawmakers for a formal government takeover of the largest global banks.
“The announcement of nationalization would immediately undermine confidence in the financial system even further and send shudders through the investment community,” he said. “By nationalization, I mean a full-scale takeover of an institution by the government in which common shareholders, and possibly debt holders as well, would be wiped out. This, in my view, would be a nightmare.”
Regulators are subjecting Bank of America and 18 more of the biggest U.S. banks to stress tests to determine whether they can survive average unemployment of 8.9 percent in 2009 and 10.3 percent next year, along with a further decline in U.S. housing prices. The testing is to be completed by late April, according to the Treasury Department.
Covering Losses
Bank of America is cutting more than $7 billion in annual expenses after its acquisitions of Countrywide Financial Corp., formerly the largest U.S. home lender, and Merrill, the world’s largest securities brokerage.
Bank of America’s expected pretax earnings of $49.3 billion in 2009 exceed the $38.3 billion in total losses likely to be recognized over the next few years, Fox-Pitt Kelton Cochran Caronia Waller analyst Andrew Marquardt wrote in a report last month. The bank has already recognized $31.7 billion in losses by marking down the value of loans and securities, he said.
“Based on our estimates, it would take less than a year to cover estimated remaining loss content,” Marquardt wrote in the report. He rates the bank at “outperform.”
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