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BoA boss defends purchases to investors

BANK of America Corp's CEO Kenneth Lewis, who used acquisitions to build the lender and his reputation, may have damaged both by pursuing Merrill Lynch & Co and Countrywide Financial Corp.

In a conference call with investors, Lewis said the company will rebound strongly when the United States economy stabilizes. "This company will generate huge amounts of profit when we get a normal economic environment, not even a great one, just a normal one," he said. BoA, which earned an average of US$15 billion annually from 2003 and 2007, recorded US$4 billion in profits last year.

Lewis defended the acquisition of Merrill, saying it remains a solid franchise and strategically important for the bank. He also said mortgage applications are off to a strong start this year as lower interest rates boost refinancings. Mortgage applications nationwide are at a five-year high, according to the Mortgage Bankers Association.

BoA officials were stunned in December as the severity of Merrill's problems mounted, and the idea of backing out of the agreement came up, according to Lewis.

"We went to regulators and told them we would not, that we could not close the deal without their assistance," Lewis said. Federal officials urged the bank to complete the transaction with the assurance of support, culminating in the US$138 billion package that includes a US$20-billion infusion plus asset guarantees. The bank will pay 8 percent on the new capital, Bloomberg News reported.

As the bank's CEO since 2001, Lewis has spent US$129 billion on purchases, including FleetBoston Financial Corp and LaSalle Bank and credit-card issuer MBNA.

The US$2.5-billion purchase of Countrywide, completed in July, gave BoA a role in about one out of every four US home sales, which Lewis said would be a boon when the market rebounded.


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