CHARLOTTE, N.C.-- Bank of America Corp. shares jumped more than 3 percent Friday as the Charlotte bank raised $19.3 billion in a securities offering and entered an "advanced stage" in its hunt for a new chief executive.
Bank of America announced the surprise news Wednesday that it had U.S. government approval to pay back $45 billion received from the Troubled Asset Relief Program. It will use the securities offering and available cash to reimburse taxpayers.
The move is expected to ease the bank's search for a replacement for CEO Ken Lewis, who is set to retire Dec. 31, because it lessens government scrutiny of the company.
The bank's board, as reported earlier this week by the Observer, will hold a regular meeting in Charlotte on Tuesday. The CEO search is likely to come up, but a decision isn't expected that day, a person familiar with the matter said.
In a filing late Thursday related to the securities offering, the bank said that the board's six-director search committee has been "meeting and conferring frequently" since Lewis announced his decision Sept. 30. It has contacted and interviewed "numerous" potential candidates, including current executives and outsiders.
The committee's work is at an "advanced stage," and the panel is expected to conclude the process in the "near future" and make its report to the board, the filing said. After "deliberation and approval," an announcement "would be expected to follow immediately," the filing said.
Among current executives, chief risk officer Greg Curl, who led government TARP negotiations, and consumer banking head Brian Moynihan are top contenders. Some of the outsiders who have interviewed for the job have reportedly suggested that Bank of America's operations should be broken up. With its Jan. 1 acquisition of Merrill Lynch, Bank of America added huge investment banking and brokerage operations to its massive consumer bank.
"Every conversation I've ever had would indicate they believe the model is the right model," Bank of America spokesman Bob Stickler said this week of the board's mindset. "They are looking for somebody who can execute against the model."
Lewis announced his decision to leave as government investigations of the Merrill deal heated up. On Friday, the House Oversight and Government Reform committee said it will hold its fifth hearing on the acquisition next Friday, but didn't disclose the witness list.
A committee aide said the hearing is expected to be the last, and key Democrats on the panel have already indicated they are ready to move on. The bank, however, still faces a slew of shareholder lawsuits and a trial over a Securities and Exchange Commission complaint related to the disclosure of Merrill bonuses.
Friday's move by Bank of America to raise capital was the biggest U.S. offering of stock or preferred shares since at least 2000, according to Bloomberg News. The bank's shares climbed 52 cents to $16.28 on a positive day for bank stocks, which were helped by a better-than-expected U.S. jobs report.
Paying back TARP is "positive news since it removes a key overhang on the shares and allows BofA to free itself of certain government restrictions including those over compensation, which will likely make it easier to bring in a new CEO and retain talent at Merrill," RBC Capital Markets analyst Joe Morford wrote in a report Friday.
Taking into account a higher share count and the reduction in TARP dividends, Morford raised his earnings-per-share estimate for the bank in 2010 to 75 cents per share from 50 cents per share. But because of a $4.1 billion charge related to repaying TARP, he drastically lowered his 2009 estimate, to a loss of 43 cents per share instead of a gain of 2 cents per share.
The Standard & Poor's 500 Index was to be rebalanced Friday to account for Bank of America's sale of 1.3 billion shares, Bloomberg News reported. The offering increases Bank of America's weight in the index, while lowering the proportion of other companies in the stock benchmark, Bloomberg reported.
