Bank of America's board of directors, under intense pressure from investors, Monday night removed President Samuel H. Armacost from day-to-day management of the bank.
Thomas W. Cooper, a relatively unknown banking executive from Philadelphia who joined Bank of America last year, assumes the newly created post of president and chief operating officer of the bank. He is charged with "operational management of the bank's basic businesses," B of A said in a statement.
Separately, the board of directors of BankAmerica Corp., the bank's parent company, firmly rejected New York financier Sanford I. Weill's proposal to raise $1 billion in new equity capital in exchange for the chief executive's post at the bank.
Prussia Loses Bank Title
Under the management realignment, Leland Prussia, chairman of the board of the bank, was stripped of that title but was named chairman of the bank's executive committee. Armacost gains the title of chairman and chief executive of the bank.
The bank said the moves were intended to "accentuate Bank of America's management strengths and add depth and emphasis to strategic areas of critical importance."
The Weill bid, disclosed in mid-February, helped boost the price of BankAmerica's stock and, some say, symbolized Wall Street's disillusionment with Armacost's handling of the bank. The stock fell $1.25 to $16.375 on Monday after investors apparently concluded that Weill's offer would be rejected.
"The board of directors is not desirous of making a management change," Dr. Franklin D. Murphy, chairman of the board's executive committee, said in a curt letter to Weill. "Accordingly, the outside directors unanimously agreed that we have no interest in considering you as a candidate for the chief executive officer's position."
The use of the qualifier "outside" in referring to the directors who endorsed the statement indicated possible disagreement from one or more of the company's inside directors (those employed by the corporation).
Charles Schwab, chairman of the company's discount brokerage unit and a member of the board, has been a vocal critic of Armacost and reportedly has been more receptive to the Weill offer. Schwab could not be reached for comment. The position of a second inside director, Richard P. Cooley, chairman of the Seafirst subsidiary, was not known.
In a letter accompanying the board's statement, Armacost told Weill that BankAmerica could raise its own capital but had decided, with the advice of investment bankers, that it was not in the interest of stockholders to do so now. Armacost also instructed Weill to send any specific additional proposals that he might have for BankAmerica to him by air express no later than Thursday.
Offended by Bid
The tone of Armacost's letter to Weill left no doubt that he was offended by the Weill bid to unseat him and believes that the bank does not need Weill's advice or counsel to address its many problems.
Weill advisers said the bank's frosty response made it unlikely that his plan would receive a fair hearing. They said they had not decided on their next move.
The bank has been beset by massive loan losses, financial scandals, declining earnings, defections of key executives, falling stock prices and fading investor and public confidence. The bank lost $337 million last year, one of the largest annual deficits in U.S. banking history. It charged off a stunning $1.6 billion in bad loans in 1985.
While Weill's supporters contended that the management changes were largely cosmetic, analysts disagreed.
"Cooper will strengthen the bank's management," said Don Crowley, senior vice president of the New York brokerage of Keefe, Bruyette & Woods. A veteran of Philadelphia's Girard Bank, which recently was acquired by Mellon National Corp. of Pittsburgh, Cooper "is considered tough-minded and very willing to speak up."
At the same time, Crowley said, Monday's actions may deflect criticism that BankAmerica's board has been complacent in the wake of recent shocks that have tarnished the reputation of the nation's second-largest bank holding company.
"Shaking things up can only help this board's image," he said.
But whether it will be enough to rehabilitate BankAmerica remains to be seen.
"I don't know if this reorganization is enough to put life into the organization's image," said George Salem, banking analyst with the New York investment house of Donaldson, Lufkin & Jenrette. "This Cooper's an unknown."
Analysts agreed that Prussia was the biggest loser in the shake-up, although he retains his title of chairman of the holding company. Armacost, who already holds the titles of president and chief executive of the parent firm, gains the additional title of chairman and chief executive of the Bank of America unit. Removing him from daily control will allow him to "concentrate more time on policy and growth opportunities," the bank said in a statement.
The board also tapped two outsiders for key positions and shuffled other positions to "sharpen operations" and "increase the pace of the bank's earnings recovery."
Lewis W. Coleman, formerly of Wells Fargo & Co., was named executive vice president and senior credit officer for the bank's troubled world banking division, which handles loans to major corporations and foreign borrowers.
William H. Sperber was named senior vice president and general auditor of Bank of America and general auditor of the parent company. He joins the bank from the accounting firm of Deloitte, Haskins & Sells, where he was a partner and national services coordinator. The bank's auditors have been criticized for being slow to recognize the extent of Bank of America's loan woes.
Appears to Buy Time
Recently hired Chief Financial Officer John S. Poelker was given the additional title of executive vice president of BankAmerica and placed on the managing committee and the money and loan policy committee. He joined the bank last month from Citizens & Southern Georgia Corp., an Atlanta bank holding company.
Under the bank's new structure, only three top officers will report directly to Armacost: Poelker, Cooper and Glenhall Taylor, the bank's chief loan policy officer.
The moves appear intended to buy time for Armacost and his top managers to deliver on promises to restore the bank to profitability. He took to the board of directors Sunday a strategic plan for the next three to five years, favorable results for the month of January and written expressions of support from three of the bank's investment banking firms.
"If we didn't have confidence in present management, we would not have written the letter we did," said Charles Nathan, a managing director of Merrill Lynch Capital Markets.
Other Wall Street sources, however, privately predict that Armacost will not survive the year unless the bank shows a strong and sustained earnings recovery.
"The real-life problem is that the board is nervous and has to do something," said one investment banker who has worked closely with the bank.