April 16,2009
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News: BoA's Ken Lewis Responds to 1st Qtr Net Income.
In an interview with CNBC's Maria Bartiromo, Bank of America's CEO Ken Lewis responded to today's release of the BoA's first quarter net income of $4.2 billion. Despite a 20% decline in stock prices, Lewis was pleased with the company's performance. He acknowledged disappointment over the decline in stock and attributed it to a lack of confidence over the banking industry's instability in spite of the credit card division. He stated that he was pleased with Merrill Lynch and Countrywide's contributions and points out that when these two entities are removed from the mix, they still posted over $2 billion after taxes. When asked about BoA's plans to sell off their credit card business to raise capital, Lewis maintains they have no plans to do so. Lewis further stated that the credit card business was an important commodity for BoA.
Marie pointed out the $ l.8 billion loss in their credit card business and ask Lewis when we can expect to see a "substantial recovery." Lewis pointed out that a $2.9 billion reserve bill added to the credit card losses and he expects these losses will continue throughout 2009. On a positive note, Lewis states that these large reserve bills will progressively become non-recurring items. He views this as the "silver lining" and says as these goes away, we should begin to see credit card earnings increase. Lewis also noted that there has been a slight increase in consumer confidence demonstrated by small increases of debit and credit card usage in retail sales for January and February. Although he sees these as seasonal, he is confident that these are early signs of some small improvements in the economy.
Lewis expects to see some changes in the credit card industry with the expected passing of the "Credit Cardholders' Bill of Rights Act 2009" recently introduced in the House. He believes they must react appropriately to the Act. He does not think selling the credit card business would be something they should consider; however, he feels the company may have to go more upscale and become involved with more "selective risk based pricing" practices. What exactly does this mean to the consumer? We don't know at this point, but continued pressure from the White House is sure to motivate lenders to become more consumer-friendly.