Second largest US bank tries to reassure investors
The voice on the radio is businesslike and emphatic: ``Fact: More Californians trust us with their savings than any other bank or savings and loan. Fact: Our cash position is so strong that we provide billions of dollars each day to other banks.''
The voice belongs to Samuel H. Armacost, chairman and chief executive officer of Bank of America. The message, which blitzed the California airwaves last week, is intended to reassure B of A's customers and shareholders that the nation's second largest bank is financially sound.
The radio announcements followed earlier news that BankAmerica Corporation's stock had plunged to its lowest point in a decade, amid rumors the troubled company was seeking a federal bailout or was the target of a takeover.
Mr. Armacost had previously issued a statement suggesting the ``false and malicious'' rumors may have been ``spawned by speculators for their own intentions.'' The bank has asked United States and foreign regulators, including the Security Exchange Commission and the New York Stock Exchange, to investigate the source of the rumors.
The 60-second radio ads were ``directed at customers, shareholders, and the public at large,'' says bank spokesman Jeff Stov, noting B of A had received numerous questions and expressions of concern about its poor market showing. The spots were heard on 75 stations across California, where there are almost as many Bank of America outlets as there are gas stations.
Some analysts say the bank's skidding stock makes it more susceptible to a takeover, possibly by a foreign interest. But others wonder who would have the manpower and the expertise to manage the bank's 1,000 branches and its troublesome loan portfolio. Further, chances are slim that the US would allow a foreign institution to acquire the bank, says a spokesman for California First Bank, a major Japanese-owned bank.
Despite the reassuring words, however, there are signs that not all is well with BankAmerica. Last week the company rescinded its offer to buy a banking unit of Orbanco Financial Services Corporation for $57 million. In abandoning the plan to expand into Oregon, Armacost said BankAmerica had ``higher priority demands on its resources at the present time.'' But analysts suggested the Federal Reserve Board would have frowned on the plan, and might have rejected it, in light of BankAmerica's continued losses.
Most of the bank's troubles stem from problem loans, primarily in commercial real estate, California agriculture, and private and government interests in Latin America, particularly Mexico. Last year the financial giant took it on the chin with a record $337 million loss. This year has been no better: The company suspended its dividend for the first quarter, then announced a $640 million loss in June.
Looking to the future, industry analysts see only a few glimmers of light at the end of the tunnel. ``They'll have to clean up their bad loan situation'' to see marked improvements, says Mitchell C. Shafran, assistant research director for Value Line Investment Survey, a stock advisory firm.
But the clean-up is expected to take time. Mr. Shafran compares the bank's turnaround to a ship that discovers it is on a collision course with an iceberg. ``It is much easier for a motorboat to turn around than it is for an ocean liner.''
By week's end, BankAmerica's stock had recovered slightly to 10, after sinking to 9 during trading Sept. 18.