- The Washington Times - Thursday, April 2, 2009

NEW YORK (AP) - Bank of America Corp. CEO Ken Lewis is upbeat _ about both his company and the broader U.S. economy.

“I am optimistic that we’re getting close to the bottom and that we’ll be seeing signs of recovery,” Lewis said in an interview with CNBC on Thursday.

Lewis also expressed confidence that Bank of America will not only be surviving, but thriving by 2011. He said 2009 will be tough for banks, and that credit defaults keep rising. He also acknowledged that employment usually rebounds after the rest of the economy does.

But “even this year … you’ll see the earnings power of this machine, and then you’ll see it really start to come to fruition in 2010,” Lewis said during the interview. “And then 2011 should be the year that you get a lot of this behind you and see the full earnings power of Bank of America.”

Billions of dollars are locked up in loan loss reserves, Lewis added. A loan loss reserve is essentially an account set aside for the losses a bank incurs when loans don’t get repaid.

“You could actually create huge amounts of equity by just letting the banks use their reserves,” he said.

Industry analysts, however, were skeptical about the outlook for the company, which is still absorbing two troublesome acquisitions: the brokerage Merrill Lynch and the mortgage lender Countrywide Financial.

Loan losses are expected to keep soaring, and those reserves will be needed, said Christopher Whalen, managing director of Institutional Risk Analytics.

“I understand that everybody wants to bring confidence up, but we have to have some basis for confidence,” Whalen said. “It’s irresponsible for an executive of a public company to be speculating in the way that he is. He should be more contrite, more circumspect than he is.”

Earlier this week, the Standard & Poor’s/Case-Shiller index of home prices in 20 major cities showed a record decline of 19 percent for the three months ending in January compared to the same period last year. Meanwhile, job losses keep mounting _ the Labor Department said Thursday that initial jobless claims jumped to a 26-year high of 669,000 last week.

And if anything, large banks were under-reserving until 2007, Celent bank analyst Bart Narter said.

“I don’t think things are quite as rosy as Ken Lewis would like to have us believe,” Narter said.

Shares of Bank of America rose 6 cents to $7.12 in afternoon trading.

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