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Should Bank of America back out?

Is Ken Lewis right to have cold feet? Or should he stick with investment banking a little bit longer?

Many millions of dollars and several thousand staff later, it seems Ken Lewis is having serious second thoughts about his intention to become a hip-shaking, hard-hitting, big-swinging investment banker.

After disclosing a 32% decline in 3Q profits, largely courtesy of trading losses and markdowns on leveraged loans, Lewis disclosed that investment banking just wasn’t fun any more.

“I’ve had all of the fun I can stand in investment banking at the moment,” he told analysts, before going on to announce that, “The probability of changes and eliminations of some businesses and infrastructure … is very high.”

Now, we can’t help but think this is a bit of a shame. Lewis has, after all, sunk some $600m to $700m into building its investment banking platform (according to Lori Appelbaum at Goldman Sachs) and we have the pleasure of being acquainted with several nice people in the London office.

Commercial logic may dictate that Lewis’s chilly extremities are leading him in the right direction, however. The European head of one international headhunting firm says Bank of America was never committed to its investment banking intentions: “It was a tenuous effort and a defensive move on their part – they embraced investment banking on a defensive basis and got second-tier people. There was no real reason to go and work there unless you were in a capital-intensive business like leveraged finance.”

Do you agree? Is Lewis right to look for fun outside investment banking or should he be courting the likes of Barclays to rejuvenate his i-banking enthusiasm? And, following last week’s revelations, should B of A’s investment bankers wait around to find out?

Comments (3)

  1. They should get out as they are are not a great bank outside the US anyway and it lessens the competition for the rest of us, not that it would affect the league tables much as they are not even on our league tables!

    Bulge Bracket IBD Reply
  2. get some one like bob diamond from bar cap or a MD goldmanite to re ignite.. the opp cost of exiting IB is too high in the long term

  3. As an ex UK employee of BoA dating back to the late 90’s when they exited UK mainstream broking/banking, I agree that they have played at acting as an Investment Bank but never really showed commitment by building a Tier 1 Tam to run the UK enterprise. Obviously the UK was a part of the global group but anecdotally, they have seemingly failed to show an International commitment level that their peers seem to have. On balance they should have pulled out years ago given the cyclical nature and poor earnings visibilty attaching to investment banking

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