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25 April 2024

BoA rules out nationalisation and fresh aid


Bank of America (BoA) has ruled out the need for fresh government funds or nationalisation, according to a memo authored by CEO Ken Lewis.

"Bank of America does not need any further assistance today, and I am confident we will not need any further assistance in the future," the memo read. "I believe our company has more than enough capital, liquidity and earnings power to make it through this downturn on our own from here on out," he said.

A string of commentators, including the former chairman of the Federal Reserve Alan Greenspan, had advocated nationalisation as the "least bad solution" as markets continued their meltdown.

The US government has already injected $45 billion (Dh165.28bn) into both Citigroup and BoA to prevent their collapse, in exchange for preferred stocks, without voting rights. Lewis is opposed to nationalisation, creeping or otherwise.

"Speculation about nationalisation is based on a lack of understanding of our bank's financial position as well as a lack of appreciation for the adverse ramifications for our customers and the economy," he said in the memo.

Lewis admitted the economic climate continued to be gloomy.

"The recession is continuing to worsen and rising credit costs will continue to put great pressure on our ability to generate earnings," he said.

But Lewis also offered staff a glimmer of hope, adding that by the middle of the first quarter, trading activity had "vastly improved" versus Q4 2008, when the bank posted losses of $1.7bn.

According to Lewis, the corporate debt market had also shown an improvement.