Challenged by uneven profits in the face of solid revenue growth, BankAmerica Corp. has undertaken a bold and expansive housecleaning of its international operations.
"Banking is a tough, competitive business and margins are not what they were," said Michael J. Murray, the bank's new head of corporate banking. "We will be reducing capital and commitment in some areas and expanding in others."
Since late last year, the bank has been shifting away from traditional international commercial banking in favor of such businesses as project finance, global payments, leasing, trading, and capital markets activities, said Mr. Murray, a BankAmerica vice chairman.
He said many of these products and services would be marketed in emerging economies such as Russia, Poland, and China.
To cut costs, Mr. Murray said, BankAmerica has reduced its commercial lending staff in Japan and foreign exchange staff in London, sold off or reduced stakes in subsidiaries in Australia, Hong Kong, and South Korea, and streamlined worldwide operations by centralizing management of back office activities and some processing.
The initiatives are an attempt to deal with the fact that international earnings have been erratic despite growth in revenues. These earnings surged last year to $463 million from $306 million in 1995, after declining for two straight years.
Analysts view the current overhaul as much overdue.
"Bank of America has largely serviced clients until now with traditional banking lines that emphasized credit, payment products, and a variety of trading and risk management products, but they definitely have to go beyond that," said Arthur P. Soter, a banking analyst at Morgan Stanley.
The intensive effort to reorganize international operations comes more than a decade after BankAmerica scaled back overseas activities in the wake of the Third World debt crisis.
It expanded again after the acquisitions of Security Pacific Corp. in 1992 and Continental Bank Corp. in 1994 and in the wake of the rapid internationalization of financial markets.
Since then, BankAmerica has become a leader in global loan syndications, cash management, trade finance, project finance, and leasing, and is active in consumer banking in Asia.
Mr. Murray, who joined BankAmerica from Continental three years ago, took pains to emphasize the significance of a global network to the California bank.
"Given our extensive client basis, it is tremendously important for us to be able to serve companies on a broad geographic scale," he said in a recent interview.
Contrary to some news reports, he stressed that BankAmerica is not shutting down parts of its international network and added that operations are likely to grow more in the future.
After opening offices in Vietnam, China, Poland, Russia, and South Africa over the last few years, he said, BankAmerica will probably add representative offices in several other countries, most likely in Eastern Europe, which may later be converted into full fledged branches or be replaced by banking subsidiaries.
He also said country managers have been instructed to spend less time running day-to-day operations and more on drumming up extra revenues.
"We have a very strong view that there is no individual product strategy that will lead to nirvana," Mr. Murray observed."I know of no other way of getting revenues other than from clients, and we intend to be harsh on costs that don't generate revenues."
To cover costs of the reorganization, Bank America has taken a $130 million chargeoff.
For Mr. Murray, vice chairman and head of corporate banking at Continental Bank Corp. before it merged with BankAmerica in September 1994, the task has been enormous.
Although analysts generally commend BankAmerica for progress to date, some, like George M. Salem at Gerard Klauer Mattison, wonder whether the bank is getting into the game a little late.
"They've done a good job reorganizing the place for the better but they're coming in late on the capital markets business in emerging markets," Mr. Salem noted.
"It's quite competitive now compared to two years ago and they're not deep enough into places where they would like to be."
Mr. Murray himself is the first to admit that coming to grips with a large and complex network spread across 38 countries is no easy task.
"People talk about emerging markets as if it were all one thing," he said. "But what you do in China, Malaysia, and the Philippines isn't the same because these places are quite different from each other."
He firmly believes BankAmerica is on track.
"We have a worldwide system and a history of thinking global at BankAmerica that is our greatest asset," Mr. Murray said. "Any bank that tried to duplicate this structure would find it enormously difficult, not just in terms of bricks and mortar but in terms of building clients." u
