Kenneth D. Lewis, the chairman and chief executive of Bank of America Corp., gingerly predicted that the credit market's pain would peak before the end of this year.
"We've got a ways to go," he said Wednesday at a New York conference, but he forecast that loan delinquencies and chargeoffs would top out by October.
Problem credits, he noted, are concentrated in four states: Arizona, California, Nevada, and Florida. "Ironically, these are states you would bet on in the long run."
Mr. Lewis, who appeared at The Wall Street Journal's Deals & Dealmakers conference, hit on many of the industry's hot topics, including the Countrywide Financial Corp. deal (still on) and the future of midsize banks (bleak).
He also touched once more on investment banking, an area where he professed no appetite for bargain hunting. "We're not interested in using our petty cash to buy any of the investment banks."
Mr. Lewis reiterated his regret of a comment that he had had "all the fun he could stand" in that business, and he said B of A's investment bank is now more focused and doing well.
"I feel so much better about the investment bank than I did a few months ago," he said. The "mission creep" has stopped, and its second-quarter results will be "one of its three or four best." The investment bankers at B of A "have gotten over my comment."
Mr. Lewis backed the Federal Reserve Board's rescue of Bear Stearns Cos.
"The fear of the unknown in that one was so severe … that I think that was the right decision," he said. Without moves to widen access to the discount window, "one or more investment banks would have failed."
That access should come greater supervision, he said.
"It couldn't happen to nicer guys," Mr. Lewis said of his Wall Street rivals, who "can't have it both ways." He did not specify how investment bank oversight should be increased, except to say they should continue to deleverage their balance sheets.
He conceded that the Countrywide deal, set to close this month, has not turned out as he expected.
"I knew I would get a lot of adverse publicity," he said. "I didn't anticipate the level of pain and political feedback we've gotten."
Countrywide may not be quite the deal B of A expected, but strategically it remains sound, Mr. Lewis said. The company's technology and sales force are big assets, he said, and once the deal closes, B of A would lead the mortgage market.
"To have 20% of anything in this country, especially an anchor product, that's a great position to be in," Mr. Lewis said.
He reiterated his opinion that B of A does not need to grow internationally.
"To be unimportant in a lot of places" is not a better strategy than B of A's plan to be a dominant domestic player.
He did not take the bait when asked if his company wants Congress to overturn the law barring any bank from controlling more than 10% of the nation's deposits. "It's a silly law," he said. "It was a number picked out of thin air at the last minute."
However, B of A does not need a change, he said. "We're where we want to be."
