While other U.S. banks were fleeing emerging markets last summer, Susannah M. Swihart, chief financial officer at BankBoston Corp., was urging her company to stand tough.
Though BankBoston did pare back trading, it expanded corporate banking services and consumer branches in its Latin American strongholds.
The expansion, she said, positioned the bank for an influx of deals and deposits just as other financing sources were drying up. "We benefited from the flight to quality," Ms. Swihart said. "In times like these people move money to safe havens."
Ms. Swihart, 43, has become a key player in bringing BankBoston's businesses into focus for the 21st century. Her rising star at the $73.8 billion-asset banking company was marked in July by a promotion to vice chairman and an appointment to the office of the chairman.
Ms. Swihart has already reallocated $1 billion from lagging business lines into the company's three prime units-corporate banking, retail consumer, and Latin America operations.
The continuing task, she said, is to get a handle on where the risks and rewards lie. "It's all about managing risk and allowing for growth," Ms. Swihart said. "We have a more complicated business mix than banks of comparable size. Careful positioning is what helps us manage through.
"I want to make sure that, No. 1, we have clear strategies as a company," said Ms. Swihart, an 18-year veteran of BankBoston who earned both her undergraduate and business degrees at Harvard University.
Under Ms. Swihart, units must return at least $18 for every $100 they receive from the banking company-that is, produce an 18% return on capital. And they cannot stumble for long without being cut loose or restructured.
Whether the issue is expansion overseas, or a national corporate lending program, Ms. Swihart is in the mix, emphasizing advance planning and projections.
"This is a company with very good revenue growth possibilities," Ms. Swihart said in a recent interview. But she added: "We don't grow just the sake of growing."
While this approach is hardly unique among banks, BankBoston appears to be ahead of many of its peers in its rigorous focus on financial risk analysis, a consultant said.
BankBoston recognizes the world as a fast-moving market and emphasizes agility, said George Davis, a former Citicorp executive who is now a partner with The Futures Group, Glastonbury, Conn.
"They are saying, 'I may not know all that will happen, and I don't want to lock my company to a path because of that,'" Mr. Davis said.
The company cites the repositioning of its Latin America businesses as example of smart planning in action.
Ms. Swihart said her staff had sized up how operations in Argentina and Brazil would fare amid recession, depression, or interest rate fluctuations. Based on this stress testing and on past experience, Ms. Swihart concluded that certain services would still be needed and would remain profitable.
As interest rates rose, spreads between assets and liabilities at BankBoston's Latin America operation widened from 400 basis points to 1,600 basis points and the company was able to arbitrage deposits into higher- yielding assets.
"If you look at the track record for the bank in Latin America," Ms. Swihart's decisions have been sound, said Thomas Theurkauf, banking analyst at Keefe, Bruyette & Woods.
Still, the Latin America operation may be exactly what makes BankBoston vulnerable, some observers say.
Nancy Bush, banking analyst with Ryan, Beck & Co., says the odds are fifty-fifty whether BankBoston can remain independent under its current strategy, said "The problem is the capital needs of Latin America are large and erratic, and that's a real issue for them."
And there have been stumbles.
Like other banking companies with large trading desks, BankBoston suffered losses when its bets on foreign currencies and emerging markets were whipsawed by volatility this year.
BankBoston has also fallen victim to deception. Some $66 million of loans were made fraudulently by an employee at its private bank in New York, the banking company said. The company wrote the loans off in the first quarter, but is continuing collection efforts, a spokesman said.
For the most part, "We know how to position our businesses to do well in good times and in volatility," Ms. Swihart said. "As a result, we've got very strong growth potential internally and externally."
A key person in the positioning process is John Mastromarino, who spent 18 years as an examiner and auditor with the Office of the Comptroller of the Currency before joining BankBoston in 1995 as executive vice president for risk management.
"We want to make sure we understand where we are today and where we might be in the months and years ahead under different market scenarios," Mr. Mastromarino said. "Stress testing allows us to set limits on certain things that we don't do so well."
Ms. Swihart's team also tracks operational risks-problems that can occur in house. The operations risk management procedures include monitoring units for high staff turnover, above average complaints, suspense accounts not reconciled monthly, and high staff vacancy rates.
The next goal is to see how well the company can determine upcoming earnings.
By doing this, BankBoston hopes to take actions today, like selling certain unattractive portfolios or taking bigger positions in others that do well in a down cycle, Ms. Swihart said.
At the same time, her own role continues to evolve.
"When I went into banking I thought, 'Good, I'll have a nice, quiet job,'" she said. "It has not been that way at all. Each day it's something different."