SAN FRANCISCO -- Over the last five years, BankAmerica Corp. has carried out a great expansion drive, positioning itself for the emerging era of nationwide banking.
Bursting out from its core markets in California and Washington State, the nation's second-largest bank company has built a retail empire that stretches from Hawaii to Texas.
But the new units have been a drag on earnings so far. Collectively, they are BankAmerica's weakest business segment.
Last year, the new affiliates lost $45 million as a group, pulled down by $71 million of red ink in Texas. In this year's first quarter, they broke into the black - just barely - earning $2 million.
Luke S. Helms' job is to fix that.
Brought to San Francisco headquarters from Seattle last year, where he headed BankAmerica's hugely profitable Seafirst unit, the 50-year-old vice chairman manages the company's sprawling retail operations.
At BankAmerica, where retail authority has long been divided, he is the first executive to oversee the entire network, now consisting of 1,926 offices in 10 western states, including branches of the old-line subsidiaries and newly established interstate affiliates.
Don't Tell Him 'No'
At Seafirst, Mr. Helms "built a sales culture that is positive and upbeat," recalled a former colleague. "He's a just-do-it sort of person - he just refuses to hear 'no.'"
Mr. Helms, a sandy-haired, round-faced Texan, is gregarious in manner and youthful in energy and appearance, with all the exuberance of a super salesman. He is tackling the challenge of turning around the new banks with the same irrepressible optimism he brought to making Seafirst a marketing standout.
A nonstop talker, his speech is peppered with words like "fabulous" and "monumental." He calls BankAmerica's lead California bank, where branches average a hefty $65 million in deposits, "the best retail franchise I have ever seen." He shows almost as much enthusiasm for even the weakest links in the company's retail chain.
After months spent on organizational issues, he now says he is focused on the thing he obviously loves most - selling.
1994: No Distractions
"Nineteen Ninety-Four is the first year we are able to concentrate on the markets with no mergers, consolidations or systems conversions to distract us," he explained during an interview at BankAmerica's headquarters.
About the new banks, he vowed: "We're going to make a lot of money soon."
That is no easy task. "The interstate bank network is going to take a lot of remedial work," said R. Jay Tejera, Seattle-based analyst for Dain Bosworth.
Today, the interstate group consists of 645 branches in eight states. It holds approximately $28 billion in assets, about 15% of BankAmerica's total of $197.2 billion in assets.
BankAmerica assembled the network largely through the purchase of thrift branches, often the debris of failed institutions sold by the federal Resolution Trust Corp.
BankAmerica frequently got poor physical plants and secondrate locations. Many of its acquisitions were branch-and-deposit deals providing few earning assets. Worse yet, management and staff of the acquired institutions often didn't know how to operate a commercial bank.
Tough Way to Expand
Banks have had the most success buying thrifts when they could fold the branches into existing networks. But BankAmerica bought savings institutions as a relatively cheap way to expand its territory.
"It's a difficult way to enter new markets," noted Mark Alpert, analyst with Alex, Brown & Sons.
The varying pedigree of the operations BankAmerica inherited complicated the integration task. In addition to thrifts, BankAmerica acquired units from Security Pacific Corp. in places like Arizona, Alaska and Idaho.
And, in some cases, BankAmerica bought commercial banks, notably in Nevada where it took over the state's largest independent financial institution.
Until recently, BankAmerica's main thrust was on knitting together this assortment, with its different data systems, branch designs and products.
Speaking at the company's annual meeting held in Seattle last month, BankAmerica chairman and chief executive Richard M. Rosenberg said: "Our goal is to build them into whole banks, with their parts operating uniformly."
There is a lot at stake. BankAmerica's earnings, measured on a per-share basis, have stagnated for years. Most of the company's businesses are mature.
Analysts debate whether BankAmerica's expansion strategy was the wisest use of capital. But however sound the original approach, the interstate network is the sector with the most potential for giving BankAmerica an earnings boost.
"If you are looking for an area of upside, this is it," said Lawrence R. Vitale, analyst with Bear Stearns & Co.
Integration in Place
BankAmerica has now largely completed the integration process. The company has disposed of marginal branches and remodeled many of the rest.
Units now use common computer systems and distribute the same products. Back office operations have been consolidated into six retail loan processing centers systemwide.
Today, the main task is to ensure managers and employees have the right attitude, BankAmerica's retail chief said.
"That means to teach customer service and build a sales culture," especially among new employees who may lack experience selling bank products, Mr. Helms explained.
A stickler for consistency, Mr. Helms looks outside the banking industry for models. While at Seafirst, he went to McDonald Corp.'s Hamburger University to learn how to standardize operations.
Attitude has long been a key part of Mr. Helms's formula. At Seafirst, he would spend hours reviewing videotapes of applicants for teller jobs, looking for people with just the right combination of perkiness and enthusiasm.
Getting the Word Out
To spread the gospel, Mr. Helms put BankAmerica's 10-state retail network under the command of 70 district managers, the shock troops of his culture-building campaign. Each is responsible for some 25 to 35 branches plus an array of alternative systems that typically include telephone operations, automated tellers and supermarket locations.
Senior vice president Vicki P. Kennedy manages the 34 branches of Arizona's central Phoenix district.
"The thrust of our training is for us to become individual franchise managers," she said. "My primary focus is to build a team of highly energized employees."
Mr. Helms said the districts are designed to be BankAmerica's basic retail unit. Currently the district managers report to senior executives at the subsidiary banks. But, with Congress about to give a go-ahead to interstate branching, the company may change the reporting system in the future to erase state boundaries.
The interstate group's top priority is now generating business. For most interstate units, rich in deposits, that primarily means booking loans.
In Texas, BankAmerica's purchases of the state's largest savings institution - First Gibraltar Bank - plus several failed thrifts provided few loans.
Concentrating on markets such as indirect auto lending, the company has tripled its Texas loan portfolio in the last year, reaching the $3.5 billion mark at the end of March, although much of that growth represents loan transfers from other BankAmerica units.
The growth of the loan portfolio has brought the Texas unit to the break-even point, Mr. Helms said.
While he has focused on BankAmerica's new units, Mr. Helms has also tried to rev up the sales culture of the core California franchise.
Bringing with him an idea he used at Seafirst, he recently organized two "Saturday Specials." In one of the one-day events, BankAmerica sold nine-month certificates of deposit with an above-market annualized rate of 5%; in the other, the bank offered free checking until the year 2000.
The CD special brought in $1 billion in deposits and the checking promotion opened 100,000 new accounts, Mr. Helms said. But he was vague about how profitable the sales are likely to be at such heavily discounted prices.
Shaking Things Up
In person, BankAmerica's retail chief had nothing but compliments for the California bank. But several people who have talked with him in recent months say he has been frustrated by the turf wars and entrenched bureaucracy in California, and has complained that its culture is resistant to change.
In several cases, Mr. Helms has shaken things up dramatically to get things done his way. In retail marketing, for example, he installed Jack David, his Seafirst marketing head, as chief and reassigned or dismissed several senior employees.
Mr. Helms said his goal was to separate advertising from product management, while developing a flatter organization.
What animates him is the belief that banks can only grow by doing a better sales job than the competition.
That means reaching customers not only from the branch, which Mr. Helms called "a box on the corner," but also with an array of alternative systems.
But, beyond that, it means using the same sales techniques that have proved successful in industry after industry: a comfortable, predictable environment; a friendly, solicitous attitude; and the right products delivered in the most convenient fashion.
For banks, "there is no natural growth out there," he explained. "The only way to add revenue is to gain market share or buy something."