BofA Loans to Minorities, Poor Boosted : * Banking: BankAmerica is trying to defuse opposition to its merger with Security Pacific by committing $12 billion over 10 years.
BankAmerica Corp., in a move to defuse potential community group opposition to its proposed acquisition of Security Pacific Corp., said it plans to commit $12 billion for loans to minorities and low-income customers over 10 years once the merger is completed.
Separately, BankAmerica reported a third-quarter profit of $285 million, a slight gain from a year ago largely because of strict cost controls and a rise in net interest income. The increase in net earnings contrasts with the dismal results of other major California banks.
The new commitment by BankAmerica, the San Francisco-based parent of Bank of America, under the Community Reinvestment Act is the biggest ever by a bank and represents a one-third increase above the combined goal the two banks had previously set on their own. BankAmerica’s goal had been $5 billion over 10 years, while Security Pacific’s goal was $4 billion over 10 years.
‘When you’ve made the largest commitment ever made, you hope that it’s positively received. I hope that everybody applauds what we’ve done and endorses the merger,” said Executive Vice President Donald Mullane, who handles the bank’s Community Reinvestment Act affairs.
Representatives of the Greenlining Coalition, a San Francisco-based collection of groups that have been putting pressure on BankAmerica to increase its commitment, could not be reached for comment on the BofA pledge. In recent years, community groups have stepped up the pressure on major banks planning to merge to force them to expand their commitments to low-income customers and minorities, in some cases filing formal protests and even successfully blocking deals.
Two other banks planning to merge, New York giants Manufacturers Hanover Corp. and Chemical Banking Corp., also plan to disclose an increased commitment, possibly as early as today.
BankAmerica’s move is the second taken with a week to counter the criticism. Last Friday, the bank disclosed sweeping changes in its mortgage lending procedures to make more loans more available to minorities and low-income customers after disclosing figures showing that it turned down minority customers for home loans at a much higher rate than Anglos. The announcement comes as the Federal Reserve Board is about to release data showing that banks nationwide turned down minority loan applicants from two to four times more often than Anglos.
BankAmerica’s actions the past week highlight how important the $4.7-billion Security Pacific acquisition is to the bank and its desire to rid itself of any potential roadblocks. The acquisition, expected to be completed by the end of February, involves swapping each Security Pacific share for 0.88 of a BankAmerica share.
On the merger, BankAmerica said it is boosting the money allocated to absorb Security Pacific by $150 million, to $900 million, mainly because costs will be higher to dispose of unneeded office space. But the bank also disclosed that the annual cost savings from the merger will be higher--about $1.2 billion within three years--because less space will be needed by employees. The previous estimate of savings was $1 billion.
Although BankAmerica’s quarterly profit rose just 1%, the bank’s results were in line with Wall Street’s expectations and were significantly better than results of the other major banks in the state. Still, BankAmerica’s stock closed down $1.625 to $42.75.
Other major banks have been hit hard by growing problems with commercial real estate loans in the state. Ironically, one reason BankAmerica is less exposed than other banks is because its troubles in the mid-1980s helped refrain it from doing more real estate lending. BankAmerica’s delinquent commercial loans secured by real estate were $742 million, up $9 million from the second quarter.
