Now comes the hard part for BankAmerica.
Having beaten back First Interstate Bancorp's hostile takeover attempt, Bank of America's troubled parent must make good on its promise to return to operating profitability in 1987 and, more importantly, to repair its damaged reputation and shattered credibility.
For BankAmerica's woes predated First Interstate's October, 1986, bid, and will not go away with the company's frustrated suitor.
BankAmerica posted a combined net loss of $855 million in 1985 and 1986, despite nearly $1 billion in gains on the sale of businesses and other assets. Its problem loans totaled a staggering $4.3 billion on Dec. 31.
"At best, First Interstate's withdrawal eliminates a distraction for B of A's management," said Dan Williams, an analyst for Sutro & Co. in San Francisco.
"But there will be no quick fix," Williams added. "This turnaround is going to take time." The BankAmerica that emerges will be smaller and more tightly focused on the West Coast, its dreams of becoming a nationwide retail banking power shattered by the huge loan losses it sustained in recent years.
Still, on balance, many observers believe that BankAmerica has emerged from the takeover battle in better shape than when it went in.
"(First Interstate Chairman Joseph J.) Pinola is to be congratulated for the improvements he has brought about at B of A," said Joseph Arsenio, banking industry analyst for Birr, Wilson & Co. in San Francisco. "Pinola was a catalyst for forcing the bank into making a number of needed changes."
Those changes include the installation last October of a new management team headed by Chairman and Chief Executive A. W. Clausen and President Thomas Cooper, an accelerated cost-cutting program and the sale of such assets as the Charles Schwab & Co. discount stock brokerage unit to bolster BankAmerica's sagging equity capital.
And while Pinola decried the "dismemberment" of BankAmerica, claiming that the sale of profitable businesses was draining away future earnings power, many analysts saw things differently.
"There is some truth to what Pinola is saying, but there is also a good deal of sour grapes," Arsenio said. "In truth, BankAmerica shook off this takeover attempt because of improvements it has made."
In Clausen, BankAmerica has a leader who is determined to vindicate himself after charges that he ran the institution for short-term profits during his prior tenure there in the 1970s. In Cooper, BankAmerica has a proven cost cutter.
To many observers, the new team, augmented by capable recruits from well-regarded Wells Fargo, seems more in control than the old management headed by Samuel H. Armacost and Leland S. Prussia.
Of course, detractors remain. "I sincerely believe that B of A isn't as well-situated as their new management claims," a source close to First Interstate said.
First Interstate's challenge also provided BankAmerica's management with a rallying cry that helped boost sagging employee morale. But with the threat of a takeover behind them, employees will once again focus on Clausen's promise to slice at least 4,000 more workers from BankAmerica's payroll this year.
About 6,600 positions were eliminated in 1986, exclusive of asset sales.
Perhaps the greatest challenge BankAmerica faces is to restore its shattered reputation. In a recent survey by Fortune magazine, BankAmerica was ranked the 299th-most respected U.S. company in a field of 300. The once-proud institution barely beat out LTV Corp., which is operating under Chapter 11 of the Federal Bankruptcy Code.
Clausen himself acknowledged the importance of the task in a recent interview. "We are a public institution," he said. "We live or die on public perception."
As a result of First Interstate's withdrawal, Clausen is likely to face a barrage of criticism from BankAmerica's institutional shareholders, many of whom favored First Interstate's bid. More shareholder suits--BankAmerica already faces about 20--and the attendant negative publicity are also likely.
Analysts say BankAmerica's stock is likely to fall today as arbitrageurs and others betting on a takeover unwind their positions. BankAmerica closed Monday unchanged at $13.875.
But, barring an unexpected shock to the banking system, such as the default of a Latin American nation, many expect the stock to recover later this year as BankAmerica's turnaround progresses.
"Pinola tried to take advantage of BankAmerica's very real weaknesses," Arsenio said. "His timing was excellent. It is just that the patient wasn't as weak as it initially appeared. The patient was able to recover."