Bank America now in fight for its name
By
JOHN HUTCHISON
in San Francisco
Day after day, the Bank of America makes prominent — sometimes dominant — headlines in San Francisco. Once the nation’s largest, the bank has been struggling for
more than two years to cure its illnesses, and now it is fighting for its name. It is face-to-face with the spectre of take-over. The business community and the area’s traditionalists gloomily view the prospect, for if the bank is devoured it will most likely be no longer a San Francisco-based institution, born at the turn of the century. The serious bidder is First Interstate Bank Corporation of Los Angeles, a thriving upstart in the world of California money-handling. To a prideful San Franciscan, the very thought is akin to that of a Wellingtonian hearing that Parliament might move to Auckland. First Interstate has a standing offer of SUS 3.4 billion for Bank America, the bank’s holding company. The bid has been rebuffed by the bank’s chief officer, but his board of directors has yet to take official action on the offer. It is complicated, but it seems to work out at SUS2I per share, while the market price holds about two thirds that. Bank of America has been floundering in a quagmire of unproductive loans to foreign entities and domestic developers since the worldwide collapse of oil prices. It was disciplined by federal authorities requiring that it increase its reserves. It reported losses of about SUSI billion in 1985-86. It is suffering from lawsuits. It has been sharply criticised for inefficiency and disorganisation. The bank last year began a succession of corrective actions which are still in progress. It sold its skyscraper world head-
quarters in San Francisco for SUS6OO million. It got SUS4OB million for a consumer lending subsidiary. It marketed its Los Angeles skyscraper for several hundred million. It is deep in a staff retrenchment which has already seen a reduction by at least 15,000 of its employees, who once totalled about 90,000. It gave its chief executive. a golden parachute worth some SUS 3 million, and replaced him with a former chief.
In Hong Kong, the bank is reducing its regional headquarters and closing three branches, with a cut of 160 staff. A hundred employees have recently been let out in Singapore. Now word comes that the bank’s Italian branches, called Banca d’America e d’ltalia, are being sold to West Germany’s Deutsche Bank for SUS6OO million. BAI, eighth largest and one of the most profitable banks in Italy, is expected to bring Bank America about SUS2SO million in pre-tax profit.
Through all these convulsions, the 80-year-old bank has seemed to maintain the loyalty of its depositors, whose accounts have been its basic strength. (It is still second in the U.S. only to Citicorp of New York.) But now there is a report, not yet official, that deposits have fallen by 3.7 per cent in the last quarter.
First Interstate’s offer is specific, and has been submitted to federal authorities. Bank of America’s sale of assets is regarded as part of the directors’ strategy to deny those assets to First Interstate, which would need them for leverage in a takeover.
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Press, 4 February 1987, Page 39
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532Bank America now in fight for its name Press, 4 February 1987, Page 39
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