With Lehman, B of A could hit Wall Street top tier

By Jonathan Stempel - Analysis

NEW YORK (Reuters) - If Bank of America (BAC.N) Chief Executive Kenneth Lewis buys all or part of Lehman Brothers Holdings Inc LEH.N, it would be the latest in a series of aggressive, large and complicated mergers that have defined his seven-year tenure.

Lewis picked up where his predecessor Hugh McColl left off, spending well over $100 billion (56 billion pounds) on acquisitions since 2004, including FleetBoston Financial Corp, credit card issuer MBNA Corp, LaSalle Bank Corp, and in July the troubled mortgage lender Countrywide Financial Corp.

These deals have helped turn Charlotte, North Carolina-based Bank of America into the nation's second-largest bank by assets and largest by market value.

But a federal law blocking purchases that would give it more than 10 percent of U.S. deposits means Lewis cannot buy a big U.S. bank. That forces him to look elsewhere for rapid growth by merger. Acquiring all or much of Lehman, Wall Street's fourth-largest investment bank, would do that, and make Bank of America a top-tier power on the Street. At last.

"They're probably the best positioned, strategically, to do this," said Michael Mullaney, who helps invest $10 billion at Fiduciary Trust Co in Boston. "With Lehman, it would have soup-to-nuts, from originations down to trading, perhaps the most premier investment banking franchise in mortgages. It's daunting in size, but the bank could realize synergies from the old Countrywide, its own mortgage franchise, and Lehman."

Referring to underwriting rankings, CreditSights Inc analyst David Hendler said a Lehman takeover by Bank of America "would catapult the combined company to the top of the fixed-income league tables, as well as material improvement in the league table for equities and M&A."

Lehman may seem an odd choice, even at a fire-sale price, given the Wall Street bank's mortgage-driven losses totaling $6.7 billion over the last two quarters. Bank of America already faces potentially big mortgage losses from the former Countrywide, which it bought for just $2.5 billion.

And Lehman's Neuberger Berman asset management unit would overlap with Bank of America's Columbia Management arm.