We weren't impressed with Bank of America's (BAC) "profit" this morning and neither are the markets. Shares are getting crushed today, down over 20%, much to Ken Lewis' dismay. The BofA CEO told Maria Bartiromo that he's disappointed by the decline, but happy to have just made $4.2 billion in the quarter.
He admitted that the fixed-income gains can't necessarily be repeated, but he still is eager to repay TARP. Okay.
We'll post any transcript and video as we get 'em.
(Note: Image is from an earlier about interview between Lewis and Maria)
Update: Here's the transcript:
BARTIROMO: WELCOME BACK. BANK OF AMERICA JOINS THE STRING OF BANKS THAT HAVE SURPRISED WITH BETTER THAN EXPECTED FIRST THE QUARTER RESULTS. STOCK DOWN ALMOST 22% ON CONCERNS ITS CREDIT QUALITY CONTINUES TO DETERIORATE ALONG WITH THE REST OF THEINDUSTRY. TAKE A LOOK AT BANK OF AMERICA SHARES DOWN AT $8.25 A PIECE. ON A FIRST ON CNBC INTERVIEW, KENNETH LEWIS, CHAIRMAN, CEO AND PRESIDENT OF BANK OF AMERICA. NICE TO HAVE YOU ON THE PROGRAM. THANKS FOR SPENDING THE TIME.
LEWIS: GOOD BEING WITH YOU, MARIA. BARTIROMO: YOU'VE HAD EARNINGS OF $4.25 BILLION FOR THE FIRST QUARTER. STOCK IS DOWN ANDINVESTORS ARE WORRIED ABOUT THE PROFITS. GIVEN THE BOOST FROM THE MERRILL LYNCH ACTIVITY, MARK TO MARKET ACCOUNTING, AMONG OTHER THINGS. THAT, OF COURSE, SIMILAR TO WHAT WE SAW THE OTHER BANK, THE TRADING PART OF THE BUSINESS THAT DROVE THINGS. CAN CHARACTERIZE THE QUARTER FOR US?
LEWIS: I WAS DISAPPOINTED IN THE STOCK PRICE DECLINE.THERE ARE SEVERAL FACTORS, SOME OF WHICH OUTSIDE OF OUR CONTROL.I WAS GLAD TO MAKE $4.2 BILLION. THAT HELPS CAPITAL AND WE WERE PLEASED WITH THAT. I THINK I WAS MOST PLEASED WITH BEING ABLE TO HIGHLIGHT BOTH COUNTRYWIDE AND MERRILL LYNCH IN TERMS OF THEIR CONTRIBUTIONS.THERE'S BEEN SOME DISCUSSION ON THE MERRILL LYNCH SIDE OF THE MARK TO MARKET, SOME OF THE LIABILITIES. TAKE THE $2.1 BILLION AWAY FROM MERRILL LYNCH, PRETAX, THE AFTER-TAX EFFECT, THEY MADE $2 BILLION AFTER TAX WHICH WOULD BE, I WOULD THINK, MORE THAN ANY OF THE STAND ALONE INVESTMENT BANKS WOULD MAKE.IT WAS A GOOD QUARTER FROM THAT STANDPOINT. THE FIXED INCOME PIECE CAN'T BE SUSTAINED PROBABLY AT THOSE LEVELS.AGAIN, VERY PLEASED WE HAD THOSE TWO ENTITIES IN THE MIX. I THINK THE OTHER SIDE IS WE WERE VERY BLUNT ABOUT CREDIT QUALITY. AND CLEARLY WE'VE GOT A WAYS TO GO BEFORE CREDIT QUALITY GETS BETTER. BUT TO HAVE THE DIFFERENT SOURCES OF INCOME TO BE ABLE TO OFFSET BOTH THE CHARGE ANALYSIS AND $6.4 BILLION RESERVE BILL, WE FELT GOOD ABOUT HAVING THAT KIND OF DIVERSITY OF REVENUE.
BARTIROMO: I GUESS PEOPLE ARE LOOKING ATTHE CORE BUSINESS IN TERMS OF THE CONSUMER PART OF THEBUSINESS.YOU'VE GOT CARDS SWINGING TO A LOSS OF $1.8 BILLION. THE GLOBAL BANKING SEGMENT WITH COMMERCIAL BANKING AND SOME ADVISORY BUSINESSES DOWN AS WELL AS RETAIL BANKING. WHEN WOULD YOU EXPECT A SUBSTANTIAL RECOVERY IN THOSE BUSINESSES?
LEWIS: WELL, MARIA, AGAIN, ON THE CREDIT CARD JUST AS AN EXAMPLE, THERE WAS A $2.9 MILLION RESERVE BILL CAUSING THAT LOSS.WE DON'T -- WE EXPECT CONSUMER LOSSES TO CONTINUE THROUGHOUT THIS YEAR. THE SAVING GRACE OR THE THING WE LOOK FORWARD TO IS AS YOU GET FURTHER OUT YOU STOP THESE BIG RESERVE BILLS. THEY BECOME NON-RECURRING ITEMS OVER TIME JUST LIKE OTHER THINGS ARE NON-RECURRING. THAT'S THE SILVER LINING, IF YOU WOULD CHARACTERIZE AS THAT. AS THEY START TO GO AWAY, YOU CAN SEE BIG LIFTS TO YOUR EARNINGS. THAT WON'T HAPPEN UNTIL LATTER PART OF THE YEAR.
BARTIROMO: LET ME ASK YOU ABOUT SETTING ASIDE MORE MONEY FOR DELINQUENT LOANS KEN. YOU ADDED TO THE LOANS LOSS RESERVES UP TO 3% JAMIE DIAMOND UP TO 4%, VIKRAM PANDIT AT CITI UP TO 5%. WHAT'S THE REAL NUMBER YOU NEED TO GET TO? WHERE DO YOU NEED TO TAKE THAT?
LEWIS: YOU HAVE TO LOOK AT YOUR COMPOSITION, MARIA.YOU CAN'T -- YOU'RE REALLY DOINGAPPLES AND ORANGES IN MANY CASES.WE HAVE A MUCH LARGER PRIME RESIDENTIAL MORTGAGE PORTFOLIO WHICH DOES NOT CARRY AS BIG OF RESERVES AS SAY, A CREDIT CARD PORTFOLIO.IF YOU LOOK AT IT CATEGORY BY CATEGORY, YOU GET A DIFFERENT ANSWER. WE LOOK FORWARD OVER 12 MONTHS AND PROVIDE 12 MONTHS' ANTICIPATED LOSSES TO PUT INTO YOUR RESERVES. THAT'S A CRAZY CONCEPT, BECAUSE YOU'RE BUILDING RESERVES AT THE WORST OF TIMES. THAT'S THE ACCOUNTING.
BARTIROMO: WHAT ABOUT CAPITAL ADEQUACY, KEN?ARE YOU EXPECTING TO NEED TO RAISE NEW CAPITAL?
LEWIS: WE'RE NOT EXPECTED -- WE'RE NOT EXPECTING TO NEED MORE CAPITAL.THE ISSUE, OF COURSE, WHICH IS WHAT WAS BOUGHT UP TODAY, HURTING SOME BANK STOCKS, WILL SOME BE REQUIRED TO CONVERT SOME OF THEIR PREFERRED TO COMMON?WE DON'T THINK WE HAVE AN ISSUE THERE. THAT'S DOWN IN THE HANDS OF THE REGULATORS AND WE HAVEN'T HEARD BACK FROM THEM AT THIS POINT IN TIME.
BARTIROMO: YOU HAVEN'T HEARD BACK FROM THEM SO WHAT SHOULD WE LOOK FOR AS FAR AS THE MOST IMPORTANT THINGSTO COME OUT OF THOSE STRESS TESTS?
LEWIS: I THINK IT WILL BE WHAT REQUIREMENTS THERE THERE ON WHAT BANKS IN TERMS OF CONVERSION OF T.A.R.P. PREFERRED INTO T.A.R.P.EQUITY.
BARTIROMO: YOU'VE SAID YOU WANTED TO PAY BACK THE T.A.R.P. MONEY IN 2009. IS THAT STILL ON THE TABLE? ARE YOU EXPECTING TO PAY BACK THAT T.A.R.P. THAT SOON?
LEWIS: WELL, WE WOULD LIKE TO.AND WOULD PREFER TO.BUT, AGAIN, THAT'S NOW IN THE HANDS OF THE REGULATORS AND WE WILL BE IN CONSULTATION WITH THEM AS TO WHAT THE BEST AVENUE WOULD BE IN THAT REGARD.
BARTIROMO: LET ME ASK YOU THIS, KEN.YOU KNOW, YOU'VE OVERSEEN, OBVIOUSLY, AN EXPANSION OF THE COMPANY OVER THE YEARS AS HAD YOUR PREDECESSOR. NOW WE'RE HEARING A LOT OF NOISE OUT OF CONGRESS OF MAKING CHANGES TO THE CREDIT CARD BUSINESS, WHETHER OR NOT BANKS CAN CHARGE -- CAN RAISE RATES ON CREDIT CARDS, FEES.THIS IS COMING TO A HEAD RIGHT NOW. DO YOU EXPECT NEW RESTRICTIONS ON THIS BUSINESS AND DOES IT CHANGE YOUR THINKING AS FAR AS HOLDING ON TO THE CREDIT CARD BUSINESS?
LEWIS: WELL, I DO EXPECT CHANGES. I DO THINK WE WILL HAVE TO REACTTO THAT. IT MAY JUST BE THAT BECAUSE YOU CAN'T DO SOME OF THE THINGS THATYOU CAN NOW IN TERMS OF RISK-BASE PRICING, YOU HAVE TO GO MORE UPSCALE TO TAKE THAT INTO EFFECT. THAT WOULDN'T BE GOOD, OBVIOUSLY, FOR THE COUNTRY. SO I HOPE -- OUR HOPE IS AS WE SEE THESE THINGS PLAY OUT WE DO LOOK REAL HARD AT THE UNINTENDED CONSEQUENCES OF SOME OF THESE ACTIONS.
BARTIROMO: WHAT DOES THAT MEAN? IN OTHER WORDS, WOULD YOU BE WILLING TO PUT THIS BUSINESS ON THETHE BLOCK? CLEARLY OF ALL THE ACQUISITIONS YOU'VE LED, YOU'RE SCALING BACK A BIT NOW, WHETHER IT BE SELLING OR PULLS BACK IN CERTAIN AREAS. DO YOU THINK ONE OF THOSE AREAS WOULD BE SELLING SOME OF THE BUSINESSES?
LEWIS: NO. WITH REGARD TO CREDIT CARD, I THINK IT'S GOING TO BE A VERY IMPORTANT PRODUCT TO BROAD BASE OF OUR CUSTOMERS. BUT IT MAY BE THAT WE HAVE TO BE A LITTLE MORE SELECTIVE IN THAT WE CAN'T USE PRACTICES WE DO NOW IN TERMS OF RISK-BASE PRICING.
BARTIROMO: WHAT ELSE MIGHT BE OUT THERE AS FAR AS REVENUE GENERATOR? IS COLUMBIA ASSET MANAGEMENT ON THE TABLE, IS THAT FOR SALE, NOW, KEN?
LEWIS: NO, IT ISN'T.WE HAVE FIRST REPUBLIC, WHICH WAS THE PROVATE BANK THAT MERRILL LYNCH HAD ON THE BLOCK.WE HAVE SEVERAL INTERESTED PARTIES AND WE'RE NEGOTIATING WITH THAT. AFTER WE DO FIRST REPUBLIC WE WILL STEP BACK AND SEE WHETHER NON-STRATEGIC ENTITIES WHETHER WE SHOULD, IN FACT, PUT UP TO SALE.AT THIS POINT IT'S ONLY FIRST REPUBLIC.
BARTIROMO: WHAT'S PLAN "B" THOUGH? WHAT KIND OF CREDIT LOSSES CAN YOU ABSORB AND REMAIN VIABLE IN AN ENVIRONMENT WHERE WE'RE NOWHERE NEAR SEEING A RECOVERY IN TERMS OF THAT CREDIT ENVIRONMENT AS YOU JUST SAID?
LEWIS: REMEMBER, YOU CAN STILL HAVEINCREASED CHARGE LOSS. IF YOU RESERVE BILL STARTS TO ABATE, THE NET RESULT IS YOU HAVE A LESS LOAN-LOSS PROVISION. WE DON'T EXPECT LEVELS OF PROVISION TO BE HIGHER GOING INTO THE THIRD -- INTO THE SECOND, THIRD, AND FOURTH QUARTERS. BUT YOU COULD HAVE INCREASED CHARGE ALLS BUT HAVE AN OFFSET. THE RESERVE BILLS WOULD BE COMING DOWN.
BARTIROMO: A LOT OF PEOPLE WERE EXPECTING WE ACTUALLY HAD TURNEDA CORNER IN TERMS OF THE BROAD ECONOMY, KEN.CAN YOU GIVE US A SENSE OF WHERE, EXACTLY, WE ARE RIGHT NOW? BECAUSE IT SEEMS THAT LOOKING BACK MAYBE WE DID HAVE AN IMPROVEMENT IN THE CAPITAL MARKETS BUT THAT WAS ABOUT IT.IS THAT A FAIR STATEMENT THERE?OR DO YOU ACTUALLY BELIEVE WE'VESEEN REAL FUNDAMENTAL CHANGE IN TERMS OF THE RECOVERY?
LEWIS: I THINK IT'S -- I DON'T KNOW IF I CAN CALL IT FUNDAMENTAL. BUT YOU ARE SEEING SOME SIGNS THAT NOT EVERYTHING IS BAD. NOT EVERYTHING IS DETERIORATING AS FAST AS IT HAD BEEN. THINGS LIKE CONSUMER CONFIDENCE, YOU'RE STARTING TO SEE SOME POSITIVE CRACKS MOVING UP. CEO CONFIDENCE, THE SAME THING. FROM LOW LEVELS BUT STILL NOT GOING DOWN AND ACTUALLY BEING UP A LITTLE BIT. WE'VE SEEN SOME SMALL SIGNS OF DELINQUENCIES OF THE EARLY STAGES ON THE CONSUMER SIDE WE'RE GOING TO CALL SEASONAL AT THE MOMENT. HOPEFULLY THAT WILL TURN INTO MORE SUSTAINED IMPROVEMENT IN THE EARLY STAGES OF DELINQUENCIES WHICH IS THE FIRST THING YOUHAVE TO HAVE. SO THEY'RE NOT -- AND WE SAW RETAIL VOLUMES IN OUR DEBIT CARD AND CREDIT CARD BUSINESSES REALLY START TO BECOME ENCOURAGING AND JANUARY AND FEBRUARY. GOT DISAPPOINTED IN MARCH BUT WE THINK THAT SO MANY OF THE HOLIDAYS CAME INAPRIL THIS TIME VERSUS LAST YEAR.THERE'S SOME EARLY SIGNS, BUT WE ACTUALLY HAVE A DIFFERENCE OF OPINION, MARIA, WITHIN OUR OWN COMPANY WITHIN OUR ECONOMISTS. THERE'S THE CONSENSUS WOULD BE THE ECONOMY WOULD START TO IMPROVE IN THE FOURTH QUARTER. WE'VE GOT A MINORITY WHO THINK WE WOULD SEE IMPROVEMENT IN THE THIRD QUARTER.
BARTIROMO: KEN, YOU HAVE A SHAREHOLDERS'MEETING COMING UP ON THE 29th. SOME PEOPLE ARE OUT THERE CALLING FOR YOUR HEAD.TELL US WHAT YOU'RE GOING TO SEE THAT THE MEETING TO REASSURE INVESTORS THE MERRILL ACQUISITION WAS A GOOD ONE, THE COUNTRYWIDE ACQUISITION WILL BEAR FRUIT, AND THAT YOU WILL GET THROUGH THIS, AND, IN FACT, THRIVE AGAIN?WHAT ARE YOU PLANNING ON PRESENTING?
LEWIS: MARIA, YOU JUST GAVE MY SPEECH.
BARTIROMO: I DON'T THINK SO.
LEWIS: THAT'S EXACTLY WHAT I'M GOINGTO BE SAYING. WE THINK WE DID THE RIGHT THING FOR THE STOCKHOLDERS OVER THE LONG TERM.WE HAVE EMPIRICAL EVIDENCE EARLY ON THAT IS THE FIRST QUARTER WE OWNED MERRILL LYNCH AND ONLY OWNED, OF COURSE, COUNTRYWIDE FOR THE LAST NINE MONTHS. WE THINK WE'RE WELL-POSITIONED WITH THOSE TWO ACQUISITIONS.YOU SEE IT IN THE REFI BOOM WITHCOUNTRYWIDE.YOU SAW IT IN THE FIRST QUARTER WITH GOOD FLOWS, CUSTOMER FLOWS WERE VERY GOOD THIS QUARTER.WE SEE THAT CONTINUING IN THE SECOND QUARTER. AND WE THINK WE HAVE A GREAT STORY TO TELL, AND, YES, IT'S GOING TO BE A TOUGH YEAR ON CREDIT THESE TWO ACQUISITIONS WE MADE WE'RE ALREADY SEEING THE BENEFITOF.
BARTIROMO: GREAT TO HAVE YOU ON THE PROGRAM TO TALK ABOUT IT. THANKS FOR MUCH FOR YOUR CANDOR. SEE YOU SEEN. KEN LEWIS, CEO OF BANK OF AMERICA.
