Bankamerica Poised to Move East

By Pollack, Andrew | THE JOURNAL RECORD, April 23, 1991 | Go to article overview

Bankamerica Poised to Move East


Pollack, Andrew, THE JOURNAL RECORD


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By Andrew Pollack SAN FRANCISCO - When BankAmerica Corp. was reeling from losses a few years ago, executives renounced their global ambitions and said they would concentrate on retail banking in California and the West.

The bank's executives still say that, only now they joke that ``West'' means anything west of Bermuda. That is because BankAmerica is now poised to make itself a major presence on the East Coast if it wins the bidding for the insolvent Bank of New England.

Even if BankAmerica is not chosen by federal regulators, who are expected to announce their decision Wednesday, bank executives and analysts say there will be other expansion opportunities for the San Francisco-based bank, the nation's second largest behind Citicorp.

Only five years ago, BankAmerica, the parent company of California's Bank of America, was the laughingstock of the industry. But through divestitures, employee layoffs and management changes it has made a breathtaking recovery and is now far stronger than most of its major competitors.

So, while the big New York banks and some of its California rivals nurse problems caused by a stack of bad real estate loans, BankAmerica is in a unique position to seize the opportunity and create the first truly nationwide retail bank.

``The Bank of America could emerge as one of the few American banks that has got key critical market shares,'' said Thomas Hanley, banking analyst at Salomon Brothers. ``If you give them another two to three years, they will truly be nationwide in scope.''

Some industry executives and analysts have questioned the wisdom of BankAmerica's bid for the Bank of New England.

Even if BankAmerica gets a bank without bad loans, the bank still might not make any money, they say. And managing an institution across the country might be hard.

Frank N. Newman, BankAmerica's vice chairman and chief financial officer, said that BankAmerica believed the New England economy would eventually recover. He also said BankAmerica's international business gave it experience in running banks far afield.

He said BankAmerica planned to keep much of the Bank of New England's management team, which is new and considered not responsible for the bank's failure earlier this year.

BankAmerica has already spent more than $600 million for 12 institutions in the last 18 months, most of them insolvent savings and loans bought with federal assistance.

The acquisitions brought BankAmerica 373 new branches and $14 billion in deposits and expanded its network from California and Washington into six other Western states.

For a bank that had its own near-death experience just a few years ago, such a rapid expansion might seem foolhardy. The moves could risk diluting management and exposing BankAmerica to uncertain economies in New England and Arizona at a time when California's own economic outlook is uncertain.

But Newman said the way the acquisitions had been handled, with regulators removing the bad loans from the failed institutions, also removed much of the risks for the new owner.

Indeed, buying failed institutions is turning out to be such an attractive way for banks to expand that Congress has started criticizing federal regulators for arranging deals that some lawmakers contend are too sweet for the acquirer.

Newman said BankAmerica was being driven by a vision that ``in the long run, national banking was just going to make sense for this nation and the decade of the '90s was when it's going to occur.'' But he said BankAmerica was being prudent.

The bank had not been thinking of expanding elsewhere in the nation so soon, but as its New England bid shows, it is willing to jump if the opportunity presents itself. BankAmerica is believed to be interested in Illinois, the Mid-Atlantic region, and in Florida and other parts of the Southeast. …

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