Boston Merger Offers Hot Seat to Retail Chief

Late last year, when Bank of Boston Corp. and BayBanks Inc. announced their intention to merge, the typical chatter began about which top managers would soon be out hawking their resumes.

Much of the attention - and a fair amount of sympathy - was directed at Edward A. O'Neal, the top retail banker at Bank of Boston since 1992.

Mr. O'Neal's plight was particularly poignant because he had already been the casualty of a megamerger. After a 23-year career at Chemical Banking Corp., he was pushed out when Chemical merged with Manufacturers Hanover Corp.

He seemed especially vulnerable now, since BayBanks is the retail banking powerhouse of the pending deal, while Bank of Boston's strengths have been in international and corporate lending. And BayBanks chairman William M. Crozier Jr., an acknowledged retail guru, is staying right where he is.

Says Tucker Anthony analyst Gerard S. Cassidy: "The biggest area of stress in the new Bank of Boston and BayBanks organization is retail. We're all watching it closely."

But if words and appearances are to be believed, Mr. O'Neal's job is safe. During a recent interview at BayBanks' corporate headquarters, Mr. Crozier said Mr. O'Neal would be running New England retail banking after the merger is completed in June.

"This guy will be running consumer banking in Massachusetts and New England," Mr. Crozier said, pointing at Mr. O'Neal, who was seated across the table. "I'm chairman of the board. Ed and I will be working closely together."

But those familiar with both organizations ask whether the formidable Mr. Crozier will actually be able to sit back and let an outsider run that much of the show. Especially if that person is a relative newcomer to New England.

"It's the honeymoon period," Mr. Cassidy pointed out. "The early signs are that they are getting along. But it's later that the clock starts ticking: a year or a year and a half from now. If they mesh, they can flourish. But we have to wait and see how it works."

To demonstrate his good intentions, the 63-year-old Mr. Crozier emphasized the similarities between him and Mr. O'Neal.

"I started out with the Hanover Bank in New York City, which became Manny Hanny," he said, to show that he, too, knows the ropes in big-city banking. "I started out in the corporate side of life."

The two men have other background details in common: prep school (Mr. O'Neal went to Middlesex, Mr. Crozier to Andover), New England private colleges (Mr. Crozier at Yale, Mr. O'Neal at Amherst), and Harvard Business School, though several years apart.

But there are also obvious differences between the executives.

Soft-spoken and polite, Mr. O'Neal, 51, favors French cuffs and a diplomatic style, which may reflect the many years he spent maneuvering his way up the ladder at a New York money-center bank. He was born and raised in England and comes across as a good listener who doesn't need or desire to be the center of attention.

Mr. Crozier is more voluble and scrappy, and eagerly states his ambition and vision for BayBanks. Born in Brooklyn, N.Y., he joined BayBanks in 1963 and spent the next 10 years fighting his way to the top of a company that turned a decentralized amalgam of banks and thrifts into a strong, coordinated superregional.

The two may turn out to complement each other, perhaps because their personalities are so contrasting. Or they may find each other difficult to deal with.

"The $64,000 question is: 'Will Ed O'Neal get frustrated and leave?'," says Tucker Anthony's Mr. Cassidy. "That is the stress point. If their personalities fit, it will be wonderful."

Those who follow the merging banks suggest that one strategy for ensuring the two executives remain compatible is to have a de facto division of labor in consumer banking.

These analysts say it would make sense for Mr. O'Neal to handle Bank of Boston's national consumer finance businesses, which include Fidelity Acceptance Corp., a Minneapolis-based automobile finance company acquired in 1992; Ganis Credit Corp., a West Coast originator of recreation vehicle and marine loans acquired in the first quarter of 1995; and Century Acceptance, a specialist in financing appliance purchases based in Kansas City, Mo., added last June.

Bank of Boston also has a new credit card product that Mr. O'Neal could look after, leaving the New England retail banking network to the folks at BayBanks who should know and understand it better, the analysts say.

Ed O'Neal will "be directed at the national consumer business," said First Manhattan Consulting Group analyst Raimundo C. Archibold. "He'll probably be less involved with the branch system over the next couple of years, but that would change as Crozier moved closer to retirement."

Thomas Hanley of CS First Boston agreed. "My gut feeling is that Bill (Crozier) is going to be running the retail banking unit," he said. "BayBanks is probably going to dominate the retail banking side of the ledger, and I'm sure that was a condition of the acquisition."

Fortunately for Mr. O'Neal, one possible rival for his job has already taken himself out of the equation. Donald Isaacs, who analysts had said would be Mr. Crozier's preference to run retail banking in the merged entity, has announced his retirement, effective April 1, 1997.

Moving Mr. Isaacs, BayBanks' vice chairman for consumer banking, into a similar post at the new Bank of Boston would have made sense. But in a recent interview, Mr. Isaacs, 48, insisted that, after working at BayBanks for more than 20 years, now is the time for him to change his life.

"I talked to Bill Crozier last fall, before the merger, (and) I'm ready to do something else," he said. "I have a long, long list of personal and intellectual things I've postponed because of lack of time: family, travel, reading, charitable organizations, work in the education sector."

Although analysts have speculated that Mr. Isaacs is the one person who could bump Mr. O'Neal off his path, the BayBanks executive insisted this is not a possibility, even if Mr. Crozier, his longtime friend and colleague, begged him to stay.

Mr. Isaacs will oversee the integration of BayBanks into Bank of Boston, but once that job is done, he says, he's out. "I'm not going to be doing retail banking in 1996 or 1997," he said. "If it weren't for this deal, I'd be leaving sooner."

Assuming that Mr. Crozier and Mr. O'Neal can work out their relationship, the new Bank of Boston should prove a formidable consumer banking competitor, both in New England and nationally.

Mr. Crozier has a keen interest in technology and its applications. BayBanks is famous for dominating Massachusetts with a ubiquitous automated teller machine network and for its early and user-friendly telephone banking service.

When Mr. O'Neal arrived at Bank of Boston in 1992, he paid close attention to the BayBanks strategy and tried to copy it. Analysts give him credit for bringing a retail sensibility to what had been largely a wholesale, corporate-oriented bank. He has been eager, for example, to adopt BayBanks-like tactics such as supermarket branches and ATMs.

He said Bank of Boston would have 50 supermarket branches by the end of 1997, twice as many as now. The combined bank will also shutter 60 traditional branches (the sites have not yet been selected), leaving it with a total of 445 branches and 1,675 ATMs.

Both executives see their competition on two planes. New England has big regional players like Fleet Financial Group and Citizens Financial, based in Providence, R.I. And nationally, major banks are expected to use the Internet or other electronic means to reach customers that Bank of Boston would prefer to think of as its own.

Fleet, however, is busy digesting two huge acquisitions - Shawmut National Corp., based in Boston, a deal that closed late last year, and National Westminster Bancorp, Jersey City, a deal that is expected to close by June 30.

"It is helpful to us to have the Fleet-Natwest merger going on," said Mr. Crozier. "There's only so much management energy around, and if they spend most of it worrying about what's going on in the Mid-Atlantic area, they won't spend so much time paying attention to what's going on here."

Bank of Boston thus wants to emerge from its $2 billion merger with both guns blazing, launching a marketing campaign that is, in Mr. Crozier's words, more of a shout than a whisper.

The merged bank will also focus on how to use the Internet. BayBanks has already created a home page on the World Wide Web to advertise its products to students. They are a natural market in Boston, which is home to many colleges that provide free Internet access to their students.

But that project provides just a hint of Mr. Crozier's grander scheme. He said that if a techie sitting out on Route 128 in the Boston suburbs can go on-line and find a home mortgage from San Francisco-based Bank of America, then Bank of Boston wants equal access to the techies in California's Silicon Valley.

"The mere presence of bricks and mortar isn't really what it's about anymore," Mr. Crozier said. "If we are sizable enough," anything is possible.

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