Bank of America Corp Chairman and Chief Executive Kenneth Lewis said it may take several quarters for the bank to repay its $45 billion of federal bailout money, though he believes the U.S. economy may bottom out in the second half of this year.

We're at a point where you're seeing mixed signals, just small mixed signals, some housing sales a little better than you'd think, or some car sales not being quite as bad as you'd think, Lewis said on CNBC television Thursday. It signals that you're getting close to the bottom.

Lewis, who turns 62 next week, spoke ahead of one of the most critical months in his eight years leading what is now the largest U.S. bank.

Charlotte, North Carolina-based Bank of America is expected to release first-quarter results on April 20. At its annual meeting nine days later, Lewis will face angry shareholders calling for his ouster in light of the bank's sinking share price and its troubled acquisition of Merrill Lynch & Co.

Bank of America took $25 billion from the federal Troubled Asset Relief Program (TARP) last year and another $20 billion in January to absorb losses at Merrill. Lewis said he regretted taking that much and that the bank won't need more aid.

Lewis and other bank chief executives met last Friday with President Barack Obama. He said Obama urged lenders to be prepared in case the economic downturn worsens.

He basically said ... we need to make sure the financial system is in proper shape, that we don't have a head fake here, and then things get worse, Lewis said. I think it's going to be several quarters before we have the opportunity (to repay TARP). If you had a window you could pay some of it back, but not all of it back, I'd like to do that.

In morning trading, Bank of America shares rose 70 cents, or 9.9 percent, to $7.75, as bank stocks posted broad gains. Through Wednesday, Bank of America shares were down 79 percent since the bank announced the Merrill purchase last September 15.

STIMULUS EFFORTS

Lewis also backed government efforts to stimulate the economy, saying the earlier piecemeal approach had not been working. People now are stepping back and realizing that some of the things we've done were done in way too much haste and that cooler heads ought to be prevailing, he said.

Referring to the recession, he added, You can't throw as many things as we're throwing at it and not break the back of this thing.

The CNBC interview did not touch on shareholder efforts to oust Lewis, the $3.6 billion of controversial bonuses awarded to Merrill employees just before the merger closed on January 1, or the many lawsuits Bank of America faces over Merrill.

Despite many defections in Merrill's brokerage, known as the thundering herd, Lewis said that in general morale is pretty good at Merrill.

Lewis has also been criticized for buying mortgage lender Countrywide Financial Corp, but he said that business is benefiting from a surge in refinancings.

Countrywide and Merrill will prove to be two of the best acquisitions we've ever made if you'll judge us over two or three years rather than two or three months, he said.

Lewis also urged regulators to reconsider how lenders should set aside reserves for bad loans. Bank of America said it set aside $8.54 billion for credit losses in the fourth quarter, leading to its first quarterly loss in 17 years.

It's in essence rather than saving for a rainy day, saving for a sunny day, because you end up having the reserves built during bad times and you release them during good times, he said. There's tens of billions of dollars in capital tied up in these consumer loan loss reserves that in my opinion doesn't need to be. So you could create huge amounts of equity by just letting banks use those reserves.

(Editing by Lisa Von Ahn and John Wallace)

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