Dec. 3–Bank of America Corp. chief executive Kenneth D. Lewis yesterday scaled back a money-management growth forecast set by the company before its planned acquisition of New England’s largestbank, FleetBoston Financial Corp. and said the resulting company will reduce its business in Latin America.
Speaking to a Goldman Sachs Group Inc. conference in New York, Lewis defended the price of the deal but said Bank of America will no longer aim to double to 15 percent the share of revenue it receives from money management, an ambitious goal it set a year ago.
Fleet’s operations in money management are to remain in Boston after the deal is completed. Both banks’ asset-management units face pressure from a slow economy, however, and New York regulators are investigating allegations that Bank of America, which is based in Charlotte, N.C., helped a hedge fund conduct improper trades in its mutual funds.
Referring to the 15 percent goal, Lewis said, “You won’t hear us talking about that number anymore” because the Fleet purchase will give Bank of America the money-management scale it needs.
The deal was announced Oct. 27 and was originally valued at $47 billion. Since then investors have driven down shares in the buyer by 6 percent amid concerns over FleetBoston’s rate of growth and disappointments in Latin America.
Lewis reiterated the theory behind the deal: to reduce costs while increasing existing lines of business.
“I know there is skepticism about whether can make the FleetBoston merger pay off for Bank of America shareholders,” he said. “Clearly the key for us is not only achieving the cost cuts, but accelerating . . growth through other initiatives.”
If approved by regulators, Bank of America’s purchase of FleetBoston would create the second-largest US bank, behind Citigroup Inc., and the ninth-largest money manager. In October, Bank of America said the asset-management business of the combined company would make up about 8 percent of its total revenue. At the end of the third quarter, the business made up 6 percent of Bank of America’s total revenue of $9.7 billion.
Bank of America’s ambitions for money management are significant for Boston, where the operations are scheduled to move after the deal closes next year and to be put under the control of FleetBoston executive Brian Moynihan. The business area will account for thousands of the jobs Bank of America has said it will maintain in New England — exactly how many depending on the division’s long-term performance.
Several analysts yesterday said they weren’t surprised that Lewis backed away from his previous ambitions.
“They would have to be the largest asset manager in the world to make 15 percent. It’s just not realistic,” said Craig Woker, a Morningstar analyst who follows both banks. “I don’t think there’s going to be any new net impact on jobs as a result, though maybe the potential for growth would be a bit less” than under the previous forecast, he said.
Said Gerard Cassidy, analyst at RBC Capital Markets, “Fifteen percent . . . in this environment is extremely challenging, so it’s not outrageous for someone to back away” from that forecast.
Attorney General Eliot Spitzer of New York accused Bank of America in September of enabling a hedge fund to make illegal trades after hours at stale prices, known as “late trading,” and to conduct illegal market timing, the quick trading of fund shares at ordinary investors’ expense.
A Bank of America spokesman said the company’s internal review of its mutual fund operations is continuing.
Lewis also said the combined bank will reduce lending in Latin America. FleetBoston has maintained major business lines in Argentina and Brazil as other banks have reduced their presence in those troubled economies.
“If you thought the amount Fleet has is about the right amount then we should eliminate all that Bank of America has,” Lewis said.
Bank of America shares rose 26 cents to close at $76.61 yesterday.
Shares in FleetBoston rose 15 cents to close at $40.86.
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