B of A Official to Talk With Japanese Bankers in Tokyo in Bid to Raise New Capital
Intensifying its search for capital in the wake of last week’s announcement that it will post a record $1-billion loss in the second quarter, BankAmerica has dispatched its chief financial officer to Tokyo for a round of meetings with Japanese bankers.
The meetings could lead to the Japanese acquiring a substantial equity stake in the troubled San Francisco banking concern, further widening the growing Japanese presence in American finance.
A bank spokesman said Wednesday that Frank N. Newman, who is also one of BankAmerica’s three vice chairmen, arrived in Tokyo on Tuesday and will stay until Friday.
Newman’s is the second such pilgrimage in three weeks by a high-ranking officer of the loss-ridden parent of Bank of America. A. W. Clausen, chairman and chief executive, also sought aid from Japanese investors on a recent visit.
Japanese banking industry sources told Reuters news service that BankAmerica has invited many banks--including city, trust and long-term institutions--to a meeting in Tokyo today .
San Francisco banking sources told The Times that Newman will couple his plea for up to $300 million in new capital with a briefing on BankAmerica’s prospects for recovery.
Hopes Were Dashed
BankAmerica’s projections that it would return to profitability this year after $855 million in losses during 1985 and 1986 were shattered by last week’s decision to add $1.1 billion to its loan-loss reserve in anticipation of losses on bad loans overseas.
Newman is likely face questions about the adequacy of BankAmerica’s reserves for its problem-plagued loan portfolio and recent management upheaval, including the sudden departure of President and Chief Operating Officer Thomas A. Cooper last month.
Earlier this year, BankAmerica filed a registration statement with the Securities and Exchange Commission covering $1 billion in preferred stock and debentures but has managed to raise just $100 million so far.
Shareholders’ equity is equal to only 2.3% of the bank’s total assets of $90 billion, about half the level that banking regulators consider desirable. The company hopes to strengthen its capital base by selling preferred stock or notes rather than by selling valuable assets as it has been doing over the past 18 months.
The few salable pieces of the company left are its 892 California branches, its Seafirst Bank unit in Seattle, its travelers check operation and its large consumer credit card portfolio. BankAmerica officials consider these to be fundamental to the company’s recovery prospects.
A stronger capital base is also considered to be a defense against an unwanted takeover offer. BankAmerica rebuffed First Interstate Bancorp’s bid to buy the company earlier this year, but New York’s Citicorp is known to be interested in acquiring BankAmerica’s deposit-rich California branch system.
Despite Japan’s high regard for Clausen resulting from his five-year tenure as head of the World Bank, sources said Newman’s success is far from assured.
“The Japanese are extremely risk-averse,” said Stephen Berman, banking industry analyst for County Securities, a New York brokerage firm. “If he does come back with something, it will likely be a package of small investments rather than a single large one.”
One knowledgeable analyst said Japanese banks might be willing to buy BankAmerica’s new securities if they can also acquire several of B of A’s profitable overseas branches.
Under the U.S. Bank Holding Company Act, a foreign investor can acquire up to 4.99% of a U.S. banking concern without the approval of federal regulators.
U.S. banking authorities and State Department officials are taking a keen interest in BankAmerica’s talks with the Japanese out of concern for BankAmerica’s health and excessive Japanese influence in American financial markets, sources said.
Trip Played Down
BankAmerica sought Wednesday to play down the significance of Newman’s trip. “As we have said before, we’d be happy to have Japanese participation in our capital program--just as we’d be happy to have investors worldwide,” a spokesman said.
Similarly, the stated purpose of Clausen’s visit was to commemorate the 40th anniversary of B of A’s Tokyo branch and to make arrangements to receive the Grand Cordon of the Order of the Sacred Treasure, Japan’s highest honor for a foreigner.
Japan’s ambassador to Washington presented the award to Clausen on Tuesday.
Newman, in a facetious gibe at the bank’s sensitivity on the subject, said last week that the real reason for Clausen’s trip to Japan was “to go to his favorite sushi restaurant.”
Times staff writer John M. Broder in Los Angeles contributed to this story.
