In the latest sign that banks are struggling to reap profits from their investment products operations, BankAmerica Corp. has quietly cut its brokerage unit's work force by 10%.
The San Francisco banking behemoth also has confirmed that its mutual fund marketing chief, Debra McGinty-Poteet, has resigned, and will not be replaced. Ms. McGinty-Poteet, who helped launch the forerunner to BankAmerica's Pacific Horizon funds, is considered a pioneer of the bank proprietary mutual fund business.
Taken together, the moves underscore how banks are reevaluating investments in the mutual fund and brokerage businesses. Sales of bank- owned mutual funds by their brokers have failed to keep pace with those of competitors, frustrating senior management.
"They've gotten a blast of cold air in an environment that has gotten very bottom-line-oriented," said Burton Greenwald, a mutual fund consultant in Philadelphia.
The job cuts affect 80 back-office and administrative employees in BankAmerica's broker-dealer, BA Investment Services, a bank spokesman confirmed. The layoffs were the result of "substantial improvements in the systems technology" used by the brokerage, the spokesman added.
In a related move, the bank confirmed that its brokerage will no longer have a single national sales manager. Richard D. Clark, the senior vice president who currently holds that position, has been offered other positions at BankAmerica.
Mr. Clark's four direct reports, meanwhile, have been put under the direct supervision of Robert Flowers, president of BA Investments. The bank wants to "streamline sales and marketing, and move day-to-day operations closer to senior management," the spokesman said.
Observers said BankAmerica's actions foreshadow similar moves by other banks struggling to make fund and brokerage operations perform better. BankAmerica boasts $12.9 billion in proprietary mutual fund assets, and its BA Investments unit has some 350 brokers.
"BankAmerica's move adds further reason for the CEO of a midsize bank in Milwaukee to raise questions about his own operations," Mr. Greenwald said. BofA's move comes on the heels of Great Western Financial Corp.'s announcement that it is considering a sale of its $3.5 billion mutual fund complex.
The departure of Ms. McGinty-Poteet - who once dreamed of building BofA into top 10 mutual fund company - hints that the bank is putting its own mutual funds in the shadows to push more well-known brands.
The first signs of that shift came last summer when BofA combined its proprietary mutual funds business with its brokerage. That put Ms. McGinty- Poteet, a senior vice president, under the supervision of Mr. Flowers, where she was given broader responsibilities in retail investments marketing.
But Ms. McGinty-Poteet "concluded she would prefer to look for other opportunities that were more exclusively focused on mutual funds," a bank spokesman said. Ms. McGinty-Poteet, who joined BankAmerica through its 1992 acquisition of Security Pacific Corp., is set to remain at the bank until Nov. 15.
Under Ms. McGinty-Poteet, BankAmerica has had rapid growth selling money market funds to institutional customers. But the bank's Pacific Horizon Funds and Time Horizon Funds could scarcely compete for retail customers with those of outside fund companies, in particular, Boston-based Putnam Investments.
"In BankAmerica, Putnam continues to take an extraordinarily overwhelming share of the sales," said Avi Nachmany, a partner at New York research firm Strategic Insight.
The bank's brokers are accustomed to selling Putnam portfolios, which are far more well-known by the public than BofA's, Mr. Nachmany said.
Indeed, BankAmerica's stock funds are performing well, but are currently leaking assets instead of capturing them, said Neil Bathon, president Financial Research Corp., Chicago.
And Mr. Flowers prefers to run a shop that's akin to a regional brokerage house, observers added. "He understands that distribution comes before selling proprietary products," said Ken Hoffman, president of Optima Group, Fairfield, Conn.
A bank spokesman added that the brokerage projected record sales for 1996.