Doesn’t Feel Betrayed, Crocker’s Cahouet Says

Crocker National Corp. Chairman Frank V. Cahouet said Friday that, in retrospect, he agrees with the decision by Wells Fargo & Co. and Midland Bank to keep him in the dark about the pending merger of Wells Fargo and Crocker.

In his first interview since the billion-dollar merger was announced a week ago, Cahouet said he did not feel betrayed by being left out of discussions that led to his bank being sold from under him. He learned of the deal only three days before it was announced publicly.

His chief regret in the entire matter, he said, was that he would not get to finish the job of turning around the troubled Crocker that he took on two years ago.

“Realistically, I would have been greatly disadvantaged if I’d been brought into those discussions. It would have been wrong to include me,” said the 53-year-old Cahouet, who left Security Pacific National Bank after 24 years to assume the chairmanship of San Francisco-based Crocker just as bad loans and high expenses were to bring it $324 million in 1984 losses.

Initial Reaction

His said his initial reaction, upon being told by Midland Bank Chief Executive Geoffrey Taylor that Crocker was being sold to Wells Fargo, was, “I’m a big boy. I’ve been in business now for a lot of years. I would have done the same thing if I were in their shoes.”

Cahouet, speaking by telephone, expressed the belief that Midland had sold Crocker for strategic reasons, not because of poor performance. He said Midland decided it could use the proceeds of the sale in more productive ways.

“They weren’t unloading a dog,” he said, using a phrase popular with bank-stock analysts. “I think it’s quite evident as you look at what’s happened to the stock of Wells Fargo. The marketplace understands that Crocker is in a good position, has a strong retail base and a very clean (loan) portfolio.”

Wells Fargo stock has risen more than 20% since the deal was disclosed.

He said Crocker has made substantial progress since he took over, in part because of Midland’s generosity. The London-based parent provided more than $300 million in new capital and took $3.5 billion in troubled real estate and Third World loans off Crocker’s books.

$38-Million Profit

After posting large losses in 1983 and 1984, Crocker recorded a $38-million profit in 1985.

“To earn $38 million on a capital base of $19 billion is not very exciting, but against a backdrop of a $324-million loss, it’s pretty exciting,” Cahouet said. He said he had expected Crocker’s earnings to double in 1986.

He said Crocker’s biggest challenge now is to keep its employees motivated and to deal with a high level of anxiety. Substantial job reductions at Crocker are expected as the two organizations are merged.

Cahouet said he had not yet decided whether to accept Wells Fargo’s offer of a seat on its board of directors. And he stressed that he is not bitter about the course of events that, in a matter of months, will cost him his job.

“I was brought in to do a job and I was told the scope of that job. We worked diligently at accomplishing it, and I feel quite proud of the job we’ve done. In business, these things happen.

“I wish I could have gone on for a number of more years, but on the other hand, I’ve been dealt with fairly.”