Rosenberg Brings Marketing Savvy to Job as B of A Chief

The questions for new BankAmerica Chief Executive Richard M. Rosenberg concerned real estate, a topic that seems to dog California bankers wherever they go these days.

Will California avoid the kind of real estate recession that has pummeled lenders over the past year in New England, New York and Arizona? Can the bank weather a major real estate slowdown, as its executives believe?

Rosenberg paused. He then leaned over and rapped his knuckles on the wooden table next to his chair in a playful gesture of superstition. The response says a lot about the Rosenberg style, parrying questions with humor, yet revealing a hint of worry instead of blurting out the party line.

Two weeks ago, Richard Morris Rosenberg, 60, stepped from the shadow of predecessor A. W. (Tom) Clausen to become chief executive of California’s largest banking company. He is only the eighth person to lead the bank since produce salesman A. P. Giannini founded it as Bank of Italy in 1904.

Rosenberg takes over after banking’s biggest comeback: BankAmerica’s rise from near-collapse to its former place as one of the nation’s strongest financial institutions. He inherits the job at a time when the financial services industry is shrinking due to a glut of banks, savings and loans and other competitors. In addition, commercial real estate is softening, which does not bode well for lenders who have financed office towers, hotels and shopping centers. Also, problem foreign loans continue to hurt banks’ earnings and competition from huge international banks in Europe and Asia is growing.

Although Rosenberg’s name is virtually unknown by the public, he has long been known in the industry as one of its most creative marketers. He earned his reputation first at Wells Fargo & Co., where he worked 22 years, and later at BankAmerica, where he started in 1985 as president of its Seafirst unit in Seattle. Rosenberg touches are everywhere in banking, from the scenic, postcard-like checks to “packaged accounts” that give you credit cards and other services with a checking account.

He is one of the few bank chief executives to reach the top through the marketing side of the business rather than through an area such as corporate lending.

Some see him as the first of many marketing specialists who will head banks this decade. The shift, observers say, is an indication of how important selling the consumer became for banks in the 1980s. Renewed focus on consumers came after regulations were eased on how much interest banks could pay depositors, corporate borrowers relied more on Wall Street and lending to developing countries led to billions of dollars in losses.

“He’s the right kind of chief executive for the ‘90s,” said Richard P. Cooley, a BankAmerica board member and longtime Rosenberg friend who is chairman and chief executive of Seafirst.

Rosenberg is reluctant to declare marketing, once a lightweight area of banking, as the fast track to the top. But at least, he jokes, “it will no longer be held against you.”

Succeeding Clausen is no easy job. He had a firm grip on the bank for 15 of the past 20 years during two terms as chief executive that were interrupted by a five-year hiatus. The man who succeeded him after his first term ended in 1981, Samuel H. Armacost, was forced out in 1986 amid growing losses.

The personalities of Rosenberg and Clausen could hardly be more different. Clausen is a formal, stern man who rarely jokes, projecting the image of a dignified, international banking statesman. Rosenberg, by contrast, is gregarious and informal, shedding his suit jacket the minute he enters his office.

During an interview Thursday afternoon in his 40th-floor corner office, which has a sweeping 180-degree view of San Francisco Bay, Rosenberg spoke in quick, excited bursts with an accent that, after 40 years, still shows he’s from Boston. He continued talking even as he jumped from his chair once to fetch a spray bottle to clean his wire-rim glasses.

Unlike the dour Clausen, Rosenberg relishes telling stories and jokes. During a recent speech, he offered a tip on doing business in the Soviet Union, where McDonald’s recently opened a restaurant to huge crowds. His advice: “Walk softly and carry a Big Mac.”

BankAmerica’s story is well known by now. Four years ago, it was on the verge of collapse, suffering huge losses from bad agricultural, foreign and real estate loans and an embarrassing mortgage securities scandal.

First Interstate Bancorp was breathing down its neck as an unwanted suitor. More important, the public and even the bank’s own employees viewed it as a bloated bureaucracy tripping over itself.

Clausen, criticized for planting the seeds of many of the problems, was given a chance to redeem himself after Armacost left. Working with a team of former Wells Fargo executives, the bank slashed costs and retrenched. Eventually it earned a record $1.1 billion last year. Rosenberg, who turned BankAmerica’s long-neglected consumer business into a profit machine, was rewarded with the top job.

Rosenberg grew up in Fall River, Mass., a gritty mill town south of Boston that was a bustling textile center before the industry fled to the less-expensive South. The son of an apparel salesman, he left to major in journalism at Suffolk University in Boston, where he was an editor of both the school newspaper and the yearbook.

Rosenberg’s college friends still marvel at his ability to read volumes of books and materials, retaining details most people easily forget. Boston Globe sportswriter Bob Monahan recalls a business class the two took together. On a whim, Monahan said, Rosenberg read the landmark Taft-Hartley Act that reformed labor relations. When the professor began to misquote a section of the law during a lecture, Rosenberg raised his hand.

“Dick, off the top of his head, gave him the whole passage. We knew the guy was bright but this was too much,” Monahan said.

He is a voracious reader who says that one of the nicest compliments anyone ever paid him was when one executive called him “extraordinarily curious.” His office bookshelf features a wide range of books, from “Age Wave,” about the aging of America, to the autobiography of corporate raider T. Boone Pickens Jr.

A self-described “newspaper nut” who reads at least four papers a day, Rosenberg recalls being stuck without a paper in a Chilean hotel in the 1970s after a coup. Desperate for something to read, he said, he ventured into the streets seeking a paper--until a soldier with a sharp bayonet convinced him he could miss one day of reading.

Rosenberg began his banking career at Wells Fargo in 1962 after earning an MBA and a law degree at Golden Gate University in San Francisco. Bank marketing then was as challenging as setting the monthly rates on safe deposit boxes. Interest rates on savings accounts were capped by law. Paying interest on checking accounts was unthinkable. Teller lines moved as quickly as those in a post office before Christmas.

That changed in the 1980s, and Rosenberg was at the forefront. Regulations on deposit rates were lifted. Banks, burned by delinquent foreign borrowers and faced with corporate customers who increasingly raised money on Wall Street, found an untapped market in the neglected checking account customer. They also found a wealth of profit to be made on home, car and home equity loans, credit cards and other consumer products.

Although BankAmerica has made a remarkable comeback, Rosenberg inherits some problems. He says foreign loans will continue to haunt the bank for a few more years as it works its way out of the problem.

More important, he says, the industry is still plagued by “overcapacity”--banking industry jargon for the glut of banks, thrifts, credit unions and such non-bank competitors as American Express.

Real estate remains a wild card. But bank executives and securities analysts believe BankAmerica is relatively insulated--in part, they say, because California’s economy is diverse.

Ironically, one reason the bank’s exposure to real estate is limited is that it refrained from lending in a big way while it worked out its problems. It put into place tougher real estate standards that many banks are only now grudgingly accepting at the prompting of regulators.

Rosenberg does not tip his hand on what lies ahead, but some signs are emerging. Expansion in the West is one. Two weeks ago, BankAmerica spent $81 million to gain entry to Arizona’s moribund banking market. The low-risk deal involved buying the branches and best assets of the failed Western Savings & Loan from the federal Resolution Trust Corp.

Rosenberg is sensitive to criticism that he lacks international banking experience. He plans to make two trips to Europe and two to Asia in the next five months. He clearly wants to re-establish the international reputation that slipped away during the bank’s revamping.

One of Rosenberg’s favorite analogies is to compare a bank to a drug company. He said there are no miracle drugs in banking. It will just take more of what the bank has been doing the past four years.

“There is no breakthrough that is going to raise those earnings from $1 billion to $2 billion that is going to come out of a laboratory,” he summed up.