Banking on the Leader
The key asset that David A. Coulter brings to his work as head of BankAmerica Corp. may be the same one he brings to a back-country trout stream.
“What makes Coulter exceptional as a fly fisherman is his ability to focus all his concentration on a small target,” said Lewis W. Coleman, the former No. 2 executive at B of A whom Coulter edged out as successor to Richard M. Rosenberg as chief executive.
Coleman, who left the bank in November to become co-head of investment banking at San Francisco’s Montgomery Securities, figures that trait will help his friend and former protege screen out the distractions that bombard him in the new post.
Among the earliest distractions have been questions surrounding Coulter’s appointment itself.
When B of A in August tapped the genial, unpretentious Coulter, 48, to succeed Rosenberg, it shocked some analysts and banking insiders who were only vaguely familiar with the then-vice chairman who ran the bank’s corporate and international groups.
Coleman, 54, the chief financial officer, had long been regarded as Rosenberg’s heir apparent, in part because both were alums of the Wells Fargo school of hard-nosed banking. Coleman declined to discuss the selection process, but a friend said Rosenberg has yet to explain to him why he was passed over.
B of A watchers see the continuing influence of A.W. “Tom” Clausen, Rosenberg’s predecessor and now an honorary board member who appointed what remains the largest bloc of B of A directors during his two stints as chairman in the 1970s and ‘80s.
When Coulter was a young financial analyst at the bank, it was Clausen who in 1980 drafted him as his assistant, leading to a succession of strategic planning assignments in the executive suite. Neither Clausen nor any of the 15 B of A directors approached for comment would speak on the record, several citing a board policy of silence on corporate matters.
*
Despite his links to Clausen and his acknowledged analytical skills, Coulter was a decided dark horse. At a company known for its vast retail franchise, he had scant consumer banking experience. He had spent most of his 20-year career in staff positions at B of A’s San Francisco headquarters rather than in line jobs connecting with customers.
Where Rosenberg was hard-charging and charismatic, Coulter was seen as astute but slightly nerdy.
“Sounds like an on-the-job-training program,” one prominent banking analyst grumbled when Coulter was named.
“Hardly a breakout move,” a former B of A executive sniffed more recently.
But Coulter has been underrated before and he relishes confounding expectations.
There was that guidance counselor in eighth grade, for example, when Coulter applied for admission to the high school honors program. “ ‘I’m going to let you in,’ ” Coulter recalls the counselor saying, “ ‘but I shouldn’t, because there are others so much better than you. You’ll be lucky if you survive.’ ”
Instead, he thrived on every level, finishing No. 1 academically, getting elected class president and winning spots on the football and baseball teams in sports-crazed western Pennsylvania.
“Dave is easy to underestimate because he basically is low-key and he’s driven by logic, not ego,” said San Francisco financier Richard C. Blum, a friend and sometime negotiating adversary.
Today, in his fifth month as chief executive, Coulter has started to make his mark at BankAmerica, winning over some skeptics in the process. (B of A directors are expected to give Coulter the title of chairman and announce Rosenberg’s retirement at the annual meeting next week.)
“He sounds like a businessman,” said analyst George M. Salem of Gerard Klauer Mattison in New York. “He’s got a very solid, conservative opinion about what he will and will not pay for something.”
Analyst Campbell Chaney of San Francisco’s Rodman & Renshaw brokerage said he noticed a change when B of A reported its first-quarter earnings last month. During a discussion with analysts, Coulter and new CFO Michael E. O’Neill noted that the company had steadily reduced its ratio of operating expenses to revenue to where it was nearly on a par with highly efficient Wells Fargo.
It was a strong performance, but what stunned Chaney was that B of A said it still wasn’t good enough. Also surprising was a new emphasis on returning excess capital to shareholders through stock buybacks and dividends and a determination to subject all future corporate initiatives to a rigorous standard for return on investment.
“The language coming out of the mouths of senior management is new,” Chaney said. “We haven’t heard terms like ‘shareholder value,’ ‘capital management’ and ‘cost control’ from them before.”
Under Rosenberg, the emphasis was on growth--and he was applauded for it. After taking the helm in 1990, Rosenberg more than doubled B of A’s asset size, largely through major acquisitions, including the 1992 takeover of Los Angeles rival Security Pacific Corp. and the 1994 purchase of Chicago-based Continental Illinois Corp.
B of A was in serious negotiations last summer toward a merger with giant Chase Manhattan Corp. that would have trumped Rosenberg’s two earlier mega-deals. The talks collapsed, however, and Chase instead merged with Chemical Banking Corp. to form what is now the nation’s largest bank. Conflicts over merger-and-acquisition strategy were said to have spawned deep divisions in the bank’s senior management, which Coulter has worked to rectify.
Coulter doesn’t rule out future deals, but he makes clear that the bank doesn’t need to be bigger--only more profitable. “The data is pretty clear: Most acquisitions don’t make good sense,” he said.
Blum said Rosenberg’s acquisitions built a solid platform for B of A. Security Pacific gave it unchallenged dominance in America’s largest retail market, and Continental Illinois made it one of the top players in corporate finance.
“Now you need somebody like Dave who is focused on the margins of the businesses and who can make this huge organization function logically and efficiently,” said Blum, a prominent venture capitalist who is married to Sen. Dianne Feinstein (D-Calif.).
It’s too early to tell where Coulter will lead B of A, but it’s clear how he will lead. It won’t be with his gut.
Coleman said his former subordinate has faith in objective analysis and will bring “a neutral attitude” to the task of making the bank’s investment--and disinvestment--decisions.
“Because he came out of the wholesale side doesn’t mean he’d be reluctant to divest a business there,” Coleman said.
The rational, even-handed approach has helped Coulter avoid making enemies in an organization that has been called “a collection of fiefdoms,” divided not just along business lines but also where the corporate chieftains might have begun their careers. Thus, there is the Wells camp, the Continental camp, the Security Pacific camp and so on.
Coulter’s background, including a blue-collar upbringing, prepared him to bridge such disparate cultures.
The son of a long-range trucker who hauled explosive gas, Coulter grew up in rural Ford City, Pa., a town 30 miles up the Allegheny River from Pittsburgh. The once-prosperous town was devastated during Coulter’s boyhood when its huge plate-glass factory moved most of its operations out of state, fleeing labor unrest.
In college, Coulter balanced the abstract with the practical, earning degrees in mathematics and industrial administration at Carnegie-Mellon University. He said the most enjoyable job he ever had at B of A was as a merger and acquisitions analyst. The job was “an ideal mix” of high-level numbers crunching punctuated by “very intense, face-to-face negotiating.”
Coulter showed himself to be adept at “managing relationships not only beneath him but above him” on the organizational chart, observed David Goddard, a former B of A investment banker now at Bank of Boston.
“He’s clearly an adroit politician, or he couldn’t have gotten to the chairmanship at a place as political as B of A,” added Ted Alt, another investment banker who formerly worked under Coulter at B of A.
Notwithstanding his skill at fashioning win-win solutions, Coulter said he finds himself drawn to zero-sum games such as foreign exchange trading where nobody gains except at someone else’s expense. He often looks in on B of A’s trading activities via his personal computer or strolls through the San Francisco trading room for a jolt of excitement.
Coulter proved his toughness by managing--against extreme resistance--a broad revamping of the bank’s corporate business, putting power in the hands of full-service “relationship managers” and taking it away from old-line lending officers. With loan profit margins thinned by competition, the goal was to pump up sales of such fee-generating ancillary services as cash management, leasing and trade finance.
It was a battle against an entrenched and sometimes macho mind-set that took Coulter a full year to win, but “it has stuck, and it’s become an industry trend,” Coleman said.
Coulter hasn’t made any splashy moves in his first five months, but he has indicated where some of his priorities lie.
On the retail side, the bank’s current mantra is “zero-defect” customer service--eliminating the aggravating mistakes that cause people to switch banks.
Although B of A’s Texas retail operation has been a longtime drag on earnings--it only began turning a modest profit last year--Coulter may disappoint analysts like Chaney who hope he will dump the division.
“I don’t think there’s any option but to be in business in Texas,” Coulter said.
B of A is also targeting small-business lending, where the profit margins are high and the customer base isn’t as picked-over as the large corporate market.
A token of the intensity of the bank’s effort was last month’s “April switch blitz” during which B of A dispatched an army of salespeople for face-to-face meetings with 140,000 potential customers. It was the biggest single calling effort in company history, Coulter said.
*
Even though the profit margins are not yet where he wants them, Coulter said he also intends to exploit B of A’s West Coast location to be a leader in commercial and investment banking in the Pacific Rim, site of the world’s fastest-growing capital markets.
Coulter defines his broadest goals simply: He wants B of A to be a top performer financially, which he defines as doubling its stock price every three or four years.
If he accomplishes that, Coulter could add millions of dollars in stock market gains to the $3.98 million in salary and bonus he earned last year.
Coulter acknowledges that he and his family are already financially secure for life. “The reason you spend 60 or 70 or 80 hours a week is that you want to be regarded as a leader,” he said. When he retires, he wants it to be said “that this guy, for a fair chunk of time, was on the leading edge.”
