B of A May Ditch Operations That Don't Measure Up

Though major mergers and acquisitions are the current center of industry attention, BankAmerica Corp. is in sell mode, said chief financial officer Michael E. O'Neill.

Businesses not fitting long-term strategy or not meeting profitability goals could be sold or at least restructured.

There are "no sacred cows," Mr. O'Neill said in an interview. "Are we finished divesting things? Probably not."

Analysts say BankAmerica's Chicago and Texas retail branches and its mobile home and indirect auto lending businesses are all under review.

Mr. O'Neill said exiting a business is generally a last resort, but "our master plan is to shift capital from underperforming units and invest in other businesses."

BT Alex. Brown Inc. analyst Joseph K. Morford said he does not expect BankAmerica to leave Texas. It may just shift its focus to a few select markets in the state, he said.

The San Francisco company has already jettisoned some of its network. It sold 68 of its nearly 200 Texas branches in June. It also sold branches in California and plans to sell its $1.6 billion-asset bank in Hawaii.

Mr. Morford said BankAmerica is considering an end to its supermarket branching contract with Jewel Food Stores of Chicago. BankAmerica opened 75 facilities in the chain over the past two years and had an agreement to open as many as 120. But Mr. Morford said "the returns are disappointing." It is unclear if the supermarket branches would be sold or the space simply turned over to another bank.

"The question we are asking ourselves is, is that investment versus other investments going to provide shareholder returns?" Mr. O'Neill said.

Because of its size, the $258.4 billion-asset BankAmerica, the country's third-largest bank holding company, is often mentioned as a likely acquirer of other big banks.

But Mr. O'Neill said his company is not in the market for such deals.

Since chief executive officer David Coulter took the helm in January 1996, "we made it pretty clear we wanted to run the significant franchise we inherited, rather than grow it," Mr. O'Neill said.

That strategy has worked, Mr. O'Neill added, noting that BankAmerica's profitability has exceeded its competitors'.

While Mr. O'Neill said he would not swear off bank acquisitions altogether, any such deal would have to bring access to a product line, rather than just geographic expansion.

Referring to the "all-time high" prices being paid for banks, Mr. O'Neill said these transactions are "not in line with our strategy."

But BankAmerica would be "keenly interested in talking to anyone else" about buying leasing portfolios, he said.

In June, the company announced the acquisition of the San Francisco- based investment bank Robertson, Stephens & Co. BankAmerica would like to increase its asset management business further, but Mr. O'Neill said this is not likely to happen soon also because of high prevailing prices.

BankAmerica would also like to make acquisitions to enhance its foreign banking businesses, particularly in Latin America and Asia. BankAmerica has tapped those markets for credit cards and merchant processing customers but would also like to explore ways to sell other products. Mr. O'Neill said he likes the demographics of foreign markets but added that the plan does not call for buying a sizable foreign bank.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER