As BofA stock sinks, CEO again defends Countrywide deal

What about the other Ken in Charlotte?

After Wachovia Corp.'s board today ousted CEO Ken Thompson from the bank's helm, some on Wall Street turned their attention to Wachovia’s arch-rival in Charlotte: Bank of America Corp.

BofA CEO Ken Lewis is battling skeptics who worry that his agreement this year to buy Calabasas-based mortgage lender Countrywide Financial Corp. could be as ill-fated as Wachovia’s deal for Golden West Financial, another mortgage titan, in 2006.

BofA shares have fallen for four straight months and lost 1.3% today to close at $33.58, a five-year low. The stock's annualized dividend yield now is a lofty 7.6%, a sure sign that the market believes the payout will be reduced. Wachovia's 41% dividend cut in April was one of the factors building up to Thompson’s removal.

I wrote here on May 22 about some of the issues dogging BofA, including doubts about the Countrywide purchase given the continuing surge in mortgage delinquencies. On a lengthy conference call with analysts today, Lewis again defended the stock-swap deal, announced in January.

As for the timing of the deal, "It certainly would be hard to make the case that it is the top of the market, but obviously you wonder -- the concern would be that you've still got dramatic ways to go before you get to the bottom," Lewis said. "We did not, at the time we announced the deal, think that the market had bottomed in terms of housing. We expected further deterioration, as has happened.

"Secondly, we've been told consistently even by the regulators that people think they’re very good operators," Lewis said, referring to Countrywide. "They know what they are doing. Now, they blew it on the credit side, obviously, but that wasn’t the operators' problems. That was the orders they were given."

The orders they were given? Wonder what Countrywide founder Angelo Mozilo would say about that?

Back to Lewis: If BofA is "in the ballpark" on the true value of Countrywide’s loan portfolio, he said, "this could be a very compelling financial transaction."

Obviously, Ken Thompson picked the market peak to swallow Golden West. Ken Lewis bought Countrywide in a fire sale. But even in a fire sale, you can’t always be sure you got a bargain until well after the fact.

Photo: BofA CEO Ken Lewis. Lawrence K. Ho/Los Angeles Times