April 7 (Bloomberg) -- Bank of America Corp., recipient of $163 billion in U.S. rescue funds and loan guarantees, should retain Chief Executive Officer Ken Lewis even after his “mistake” in acquiring Merrill Lynch & Co., analyst Meredith Whitney said.

Lewis “has done a great job” except for the Merrill Lynch deal, said Whitney, speaking to reporters today before appearing at a panel discussion in Toronto sponsored by Sprott Asset Management Inc. She called the Merrill Lynch purchase Lewis’s “one major mistake acquisition.”

Bank of America, the biggest U.S. bank by assets, paid $18.5 billion for Merrill Lynch, completing the transaction in January. Merrill Lynch reported a fourth-quarter loss of $15.8 billion, prompting the government to provide loan-loss guarantees on $118 billion of the combined firms’ assets. Bank of America’s board issued a statement in support of Lewis earlier this year, and spokesman Robert Stickler said directors are still behind the CEO.

Whitney, 39, correctly predicted a decline in U.S. bank shares last year, as well as Citigroup Inc.’s dividend cut in 2007. She left Oppenheimer & Co. in February to start her own firm, Meredith Whitney LLC.

Banks worldwide have posted $917.6 billion in losses related to debt writedowns since the beginning of the financial crisis, according to Bloomberg data. Whitney said yesterday in an interview with CNBC that the financial sector’s tangible book values will go higher, bringing up stock prices.

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.

Last Updated: April 7, 2009 18:59 EDT