Only months after NationsBank Corp. acquired Boatmen's Bancshares, it is losing institutional clients it inherited from the St. Louis bank.
Last week, a flood of rankled union clients pulled their pension plan assets out of Charlotte, N.C.-based NationsBank. Among them: the St. Louis police retirement system, which had $289 million with NationsBank, and the St. Louis carpenters union, which had $79 million invested. In addition, the local fire fighters are considering yanking $88 million of pension fund assets.
The Missouri State Employees Retirement System and the Oklahoma Police Pension and Retirement System terminated their contracts with NationsBank last week too.
Some of the defectors, which all had been Boatmen's clients, said they were dissatisfied with the way NationsBank was handling their accounts. They also complained that some Boatmen's portfolio managers and client- service representatives were no longer with the company.
"I would characterize this as a management problem that appears not to be getting resolved," said David Ross Palmer, a New York bank consultant.
To be sure, the accounts make up a small portion of the $144 billion NationsBank holds in discretionary assets. But the sudden loss of customers has been an embarrassment for the country's fifth-largest bank.
After all, the giant retail-oriented NationsBank acquired Boatmen's in large part for its money management expertise.
"When you're talking about a national versus regional organization, you're talking about a whole different mind-set," Mr. Palmer said. And "this is not the first acquisition" NationsBank has made. Only one month after the acquisition closed in January, three bond managers, Frank Aten, Paul Rapponotti, and Daniel Lane, as well as three client-service representatives, left the company.
"We wouldn't have reacted that fast if the whole team didn't jump," said John Stewart, controller of the Carpenters District Council of St. Louis. Mr. Stewart groused that only one manager is left in the fixed-income shop and he "doesn't have time to manage our money. He's probably mopping up the blood."
NationsBank disputed that nearly the whole team had departed, saying that 12 bond managers, traders, and client representatives remain.
"It's hardly a fatal blow," said Landers Carnall, chief investment officer at Boatmen's Trust Co. about the three departed managers.
Moreover, Martin "Sandy" Galt, president of Boatmen's Trust and an executive vice president of NationsBank, said he would soon bring on new fixed-income managers. "We're certainly communicating with all of our customers, and we are shoring up the fixed-income department," he said.
Mr. Palmer, the consultant, also noted that all the departing clients were unions or union-connected. These customers generally have an interest in working with local companies. The Missouri unions have temporarily moved their money to Commerce Bancorp and Mercantile Bancshares, which have operations in St. Louis.
The relationships started turning sour just after the NationsBank acquisition of Boatmen's officially closed. Mr. Stewart and a spokesman for the police retirement system said NationsBank made promises that it didn't keep, then stonewalled them or avoided communicating altogether.
In particular, he said, NationsBank representatives said they would set up a group called Boatmen's Capital Management, separate from NationsBank's institutional money management group. This division was supposed to leverage the Boatmen's name in the Midwest and handle those accounts. That unit never emerged, he said.
"There were concerns by the board of trustees that information was not free-flowing from NationsBank," said a spokesman for the police retirement system, "and there was confusion as to the direction the investment arm was taking."
The pension plan clients cited other problems too. NationsBank announced recently to its clients that it planned to sell its $190 billion-asset custody business to put more emphasis on money management. The pension clients said they wanted administration and money management handled by the same provider.
But NationsBank has decided the custody business is too competitive. "There's a much greater opportunity for returns in the money management business," Mr. Galt said.