Wagoner's exit puts BofA CEO Lewis in hotseat

By Elinor Comlay - Analysis

NEW YORK (Reuters) - Bank of America Corp Chief Executive Kenneth Lewis may be the next corporate boss to feel the heat after the administration forced General Motors Corp Chief Executive Rick Wagoner to resign in return for further government assistance.

The second-largest U.S. bank has received $45 billion from the government, making it one of the biggest recipients of government bailout money in the banking system.

Big shareholders have been calling for Lewis to step down since Bank of America announced in January it took a $20 billion government bailout to secure the acquisition of troubled Merrill Lynch & Co, which lost almost $16 billion in the last quarter of 2008.

The government may now add to the pressure from shareholders, analysts said. The sudden departure of Wagoner after nine years in the top job at GM signals the Obama administration is looking for management changes at bailed-out companies.

"His longevity in the job is probably very much in question," said Keith Wirtz, chief investment officer of Fifth Third Asset Management and a former CIO at a Bank of America subsidiary. Fifth Third holds shares in the bank.

The bank disagreed with the assessment. "We do not see the parallel with the U.S. auto industry," said a Bank of America spokesman, noting that since 1991 the bank has been profitable in every quarter except one, and made a $4 billion profit in 2008.

Still, shareholders say Lewis is in a precarious situation, citing both the government bailout as well as the fourth-quarter losses at Merrill, which suggest Bank of America did not perform adequate due diligence.

"It makes him look like he wasn't fully aware of what was going on," said Malcolm Polley, CIO of Stewart Capital Advisors, which owns Bank of America shares.

Bank of America stock closed at $33.74 before the Merrill merger was announced in September. The shares, which have lost more than 80 percent since then, dropped $1.24 to $6.10 on Monday.

The government's total cash injection amounts to more than Bank of America's market capitalization of about $41 billion.

The bank wants to repay the $25 billion from the government's Troubled Asset Relief Plan (TARP) in October "as soon as we can," Lewis told CNBC last week after bank executives met with President Barack Obama.

"He will end up leaving the organization, whether it's of his own volition or not," said Polley.

SHAREHOLDER UNREST

Wagoner's forced exit, announced Sunday, may indicate the government's strategy if other companies like Bank of America ask for more money. "It's a warning," said Robert Lutts, CIO of Cabot Money Management.

Citigroup Inc has also received $45 billion in capital from the U.S. government, and its CEO may also face pressure to step down. But Citigroup's Vikram Pandit became CEO about a year ago, and is suffering from the bad judgment of his predecessors.