Bank of America will sell almost $19 billion in stock and securities in order to repay the $45 billion it has received from the government during the financial meltdown from 2008. The current chief executive, Ken Lewis, plans to retire at the end of 2009 and many experts think that this approach will help Bank of America recruit a new CEO.
Greg Curl, currently the chief risk officer of the company, represents a strong candidate and many believe that he will be the interim chief executive officer after Ken Lewis steps back. The $45 billion have been received under the government’s TARP (Troubled Asset Recovery Program) and out of that amount, $25 billion have been forwarded to Bank of America back in October 2008. The remaining amount has been extended in January in order to help Bank of America acquire Merrill Lynch, a move a lot of analysts have considered a bad decision.
The first result of the repayment will be represented by the reduction of their Q4 net income by $4.1 billion but on the other hand, Bank of America will save $3.6 billion per year in dividend payments (dividends which would have been paid to the U.S. government). Investors have initially not had a great reaction, with its shares dropping by a maximum of 4% within hours but the situation rebounded and at this point, things may end up moving in the right direction.