David A. Coulter, who headed the old BankAmerica before its merger with NationsBank, abruptly resigned Tuesday--a week after the new bank announced stunning losses tied to a $1.4-billion unsecured hedge fund loan that Coulter had engineered in 1997.
Coulter, 51, will leave the post of BofA president Oct. 30. The merger, which created the nation’s largest bank, took effect Oct. 1.
Although there were early indications that the brainy Coulter might succeed Hugh L. McColl Jr., the 63-year-old deal maker who built NationsBank and now runs BofA, Coulter is meeting the same fate as the chief executives of many banks previously acquired by NationsBank.
In fact, according to an executive familiar with the situation, it was McColl who demanded Coulter’s resignation.
“This guy [Coulter] was a marked man from the day the merger was announced,” said analyst Richard X. Bove of Raymond James, noting that managers of acquired banks have almost never gained positions of power at NationsBank.
Bove added that the hedge fund debacle may merely explain the timing of the resignation, rather than the cause.
Coulter’s contract calls for him to receive severance pay of about $30 million, analysts said.
A BofA executive who asked not to be identified said Coulter and McColl’s relationship began breaking down shortly after the merger announcement in April.
There was friction over the way the two banks’ managements were to be integrated--most key spots went to NationsBank officers--and over what role international banking would play after the merger, the executive said. BofA had long been involved in international lending and trading, while NationsBank’s focus has been almost entirely domestic.
The differences led to a verbal confrontation between McColl and Coulter last summer in Vienna, where the two attended an international conference, the executive said. The trouble simmered through the summer and climaxed last Friday, when McColl dispatched BofA director W.W. “Hootie” Johnson to San Francisco to demand Coulter’s resignation, the executive said.
That was two days after BofA had announced that its third-quarter earnings had fallen 50% from the year-earlier period partly because of a $372-million loss on the loan to New York-based hedge fund D.E. Shaw & Co.
BofA’s stock tumbled 11% on the news, although it has since regained that ground and more. In keeping with a broad rally in financial services stocks, BofA shares rose $3.19 to $56.06 on Tuesday in trading on the New York Stock Exchange.
Still, last week’s stock plunge prompted a raft of shareholder lawsuits contending that as late as Oct. 1, McColl was falsely reassuring shareholders that the bank’s exposure to hedge fund losses was slight.
James H. Hance Jr., chief financial officer of BofA, told the Wall Street Journal in an interview last week that the bank was aware of the D.E. Shaw losses as early as August but chose not to disclose them publicly for fear that the news would worsen the losses.
Hance also said BofA was under no legal obligation to disclose the losses earlier because, although substantial, they would not have a “material” effect on a company BofA’s size.
Meanwhile, the Securities and Exchange Commission has opened an informal inquiry into whether BofA withheld information from shareholders that was in fact material, according to a report in today’s Washington Post. Both the SEC and BofA declined to comment on the matter.
Some experts praised Coulter on Tuesday, saying his legacy would be that of a leader who brought discipline and focus to the once-ungainly BofA.
“He got BofA performing again where four predecessors had failed,” said analyst R. Jay Tejera of Dain Rauscher Wessels in Minneapolis.
Coulter’s departure may remove some management support for the San Francisco-based Global Corporate Investment Banking Group, also known as the wholesale bank, a 1,500-person operation that oversees international trading and finance as well as financing of BofA’s largest corporate customers.
Coulter issued only a brief statement, saying, “It is with regret that I announce my resignation effective Oct. 30,” he said.
“David Coulter is a man of the highest integrity,” McColl said in an accompanying statement.
Coulter had been due to accompany deal maker Michael Ovitz to a meeting next week of National Football League owners in Kansas City, Mo.
Ovitz, seeking to land the league’s 32nd expansion team, wants to merge a 77,000-seat stadium--dubbed the Hacienda--and a new mall in a 157-acre sports and retail complex in Carson.
Ovitz insisted Tuesday that Coulter’s resignation will not derail his project’s momentum. Others at the bank, including senior executives, have been working on the deal and will continue to do so, he said.
Times staff writer Alan Abrahamson contributed to this report.