‘Ill-Founded and Malicious,’ Armacost Says : B of A Denies Rumors of Collapse or Sale
BankAmerica, weakened by massive loans losses and months of speculation about its financial condition, Tuesday was forced to deny Wall Street rumors of its impending collapse or forced sale to another bank.
An angry Samuel H. Armacost, BankAmerica president and chief executive, denounced the rumors as “ill-founded and malicious.” He said the idea of an imminent BankAmerica bankruptcy or shotgun marriage to Citicorp or some other U.S. bank was “groundless and a silly notion even to contemplate.”
Bank regulators in Washington also said there was nothing to the rumors and denied that they were propping up the bank with loans from the Federal Reserve.
Despite the denials, investors drove the bank’s stock down to its lowest price in nearly 20 years.
Armacost was in Los Angeles on Tuesday to complete the sale of the bank’s local headquarters in the Arco Plaza complex to Shuwa Co. Ltd., a major Japanese real estate development firm. The previously announced sale brought BankAmerica and Arco, co-owners of the downtown landmark, $620 million in cash.
The companies said the sale of the twin 52-story towers was the largest cash real estate deal ever in the United States. Arco and BankAmerica will remain in the building as tenants.
The two firms sold their interests in the building to raise money at a time when their core businesses are suffering. Arco has been hurt by falling oil prices, while BankAmerica has suffered heavy losses on loans in agriculture, real estate and the Third World.
BankAmerica, the San Francisco-based parent of Bank of America, has reported losses of nearly $1 billion in the past 18 months. The bank rebuffed two unsolicited takeover offers earlier this year but has remained at the center of swirling speculation about its future independence and the tenure of its top executives.
Tuesday’s rumors of critical financial difficulties at the bank originated in Europe, Armacost said, apparently sparked by the bank’s announced desire to sell its Italian bank subsidiary and other European holdings. The rumors spread to New York and were circulating widely in the Wall Street investment community before the stock exchanges opened Tuesday morning.
The price of the bank’s common shares fell 50 cents, closing at $11.75, its lowest price since 1967. Nearly 1.6 million shares changed hands, more than twice the stock’s normal daily volume.
The bank also said Tuesday that it plans to close its Copenhagen branch later this year or early in 1987, shifting the operation to its London-based Nordic group. A spokesman said the decision to close the branch was part of BankAmerica’s strategy of emphasizing loans to governments and big multinational companies rather than to smaller businesses.
Banking industry sources said BankAmerica’s affiliate in Germany also is for sale, but bank officials would not confirm the report.
Bank analysts reacted calmly to Tuesday’s events, attributing the rumors to skittish European investors and the soap-opera atmosphere that has surrounded the company for months.
“I heard (the rumors) about 6 this morning and started checking. I thought it was phony to begin with,” said Don Crowley, who follows BankAmerica for the investment firm Keefe, Bruyette & Woods. “These things typically come out of Europe. Most often there’s nothing to them.”
Crowley and other analysts also dismissed the likelihood of a run on the bank’s $88 billion in deposits. The vast bulk are held by individual depositors in California, who tend to be loyal.
