B of A ‘Saviors’ Are Lured by Customer Base

Why the sudden appeal of Bank of America? In the last week, two fairly shrewd businessmen applied for the job of running BankAmerica Corp., the bank’s parent company. That’s the office in which Samuel H. Armacost, the boss for the last five years, has endured the long hum of criticism--from people who talk anonymously to business journals--and the harsh verdict of Wall Street: BankAmerica’s stock fell as low as $12 a share recently from more than $30 in 1979.

It has been Armacost’s fate to preside over the disillusioned aftermath of B of A’s adventurous worldwide expansion in the 1970s. It’s the kind of job that makes fast-rising young men philosophical--Armacost is still only 47. He didn’t lead the manic charge that took B of A from $70 billion in assets to a peak of more than $120 billion in half a dozen years. But he got the job of compiling the casualty lists and covering the retreat, recognizing which loans would not be paid back and designating which offices to close.

It’s hard to be a hero in a job like that. Company earnings tend to decline; you are forced to reduce the dividend. So far as is known, nobody in those difficult years came to B of A’s San Francisco headquarters and said: “Here, let me do that,” or “Can I lend a hand?”

Now, suddenly, the eager beavers are coming out of the paneled woodwork. Sanford I. Weill, the ex-president of American Express, offered to bring himself and a cool $1 billion from investors into B of A. Chairman Joseph Pinola offered B of A a marriage with his $50-billion (assets) First Interstate Bancorp, with himself as boss of the merged corporation. Neither suitor won the fair lady, and B of A’s board of directors does not seem in a mood to encourage others.

But why were those clever fellows coming around just at this time? Simple. With a massive bad-loan write-off of $1.6 billion last year, B of A has probably put the worst behind it. The smart fellows move in to acquire or merge at times like that, while most investors are still looking in the rear-view mirror.

There’s another reason, too, beyond B of A alone. The problem of the debt-ridden countries of Latin America appears to be passing a significant turning point. Brazil and Argentina are winning compliments for economic reforms and lower interest rates from the international banks--to whom they owe a bundle. Venezuela also is getting better terms, and even Mexico, for all that falling oil prices affect it, has ceased to arouse panic among the bankers these days. The reasons lie in the money markets, where interest rates are coming down worldwide, there’s plenty of capital around and widespread calm has replaced anxiety.

The stock market is quick to pick up on such things. That is why the stock prices of the major money center banks--the Chase Manhattans, Citicorps and Manufacturers Hanovers--have been moving up after years of selling at a relative discount to the stocks of domestic banks with less exposure to the problems of international loans. Remove or reduce the threat of disaster, in other words, and the market starts to look at opportunity.

And when they look at B of A, a convalescing international bank with an enormous base of domestic business, the smart-money fellows see a great potential opportunity.

What they see is customers. Bank of America counts 23% of the households in California as its steady customers. That’s well over 2 million households. Do you know how valuable an asset those households are in today’s world, where companies as diverse as the retailer Sears, Roebuck, the insurer Prudential, the broker Merrill Lynch and the banker Citicorp are seeking customers for financial services?

Well, just for a quick comparison, consider that American Express paid $1 billion a couple of years ago for the sales force and customers--numbering in the thousands, not the millions--of Investors Diversified Services, the mutual fund outfit.

And just the other week, it was an American Express unit that pledged the $1 billion that accompanied Weill’s bid to become chief executive of B of A. Few things that involve $1 billion are coincidental.