Florida at heart of BofA's rebuilding mission

The largest bank in the country is focused on growing the business from within. And nowhere is the effort to get the message of unity out more intense than in this state.

By JEFF HARRINGTON

© St. Petersburg Times, published April 15, 2001

Cathy Bessant, head of Florida operations for Bank of America, has been on a rampage. Her goal: stamp out some old habits.

She recently barged into a top manager's office to purge it of NationsBank paraphernalia. And she chided her husband, a Naval commander, when he wore a NationsBank T-shirt the day her family moved into their new house in South Tampa.

"I understand there's been some nostalgia for the old culture," Bessant said. "We don't want to have a culture imposed on everyone, but we need to be a brilliant reflection of who we are today. . . . The way to do that is to make sure the face we put out publicly is one brand."

The symbolism is unmistakable. Bank of America, the largest bank in the country, wants to move beyond its merger-manic past. This is no longer NationsBank or NCNB, nor is it Boatmen's or Barnett. Departing chief executive Hugh McColl's multibillion dollar collection of banks must become one bank, with one mission. And with an unaccustomed focus on growing the business from within, not from without.

The bank's incoming CEO, Ken Lewis, has been drilling that message home from headquarters in Charlotte, N.C.

Nowhere is the effort to get the unified message out more intense than in Florida, where Bank of America took a beating for poor customer service after its glitch-filled, $15.5-billion takeover of Florida icon Barnett Banks.

To rebuild, the bank in October began offering Florida customers a new money market checking account, with rates close to what customers could earn in a money market mutual fund. The pilot program, now being rolled out nationally, struck a nerve.

The bank's Florida deposits are up $1.4-billion in five months, making up a lot of ground lost after the Barnett deal. Complaints are down to 225 a month from 300 a year ago, said Bessant, who took over the Florida operation in July.

Next up: Bessant is experimenting with "relationship-based" lending. Mortgages and home equity loans that would have been rejected under normal credit standards are being approved if the applicants do business with Bank of America in other ways. If the program does well in Florida, it, too, could become policy throughout the bank's 21-state network.

Bessant, who made her mark running the bank's community development efforts, knows the eyes of Charlotte are on her.

Reinventing itself

For years, stock certificates of banks that Bank of America acquired have lined the hallways outside the bank's executive offices in Charlotte.

McColl, a quail hunter, used to relish those paper trophies of banks he had bagged over his illustrious, and carnivorous, career.

No more.

Bank of America executives expect Lewis to take down the certificates shortly after he takes over from McColl at the bank's annual meeting April 25.

Lewis already has laid the groundwork to transform his institution, at least outwardly.

He broke the bank's insular mold, recruiting executives from GE, Eastman Kodak, FedEx Corp. and, most recently, Morgan Chase & Co. to improve customer relationships and restructure various business units.

Under McColl, the plum jobs used to be those involved with merger transitions.

Now, the hot jobs are in operations and those involving direct client contact. A permanent transition team for new acquisitions, a mainstay during most of the McColl era, has been eliminated.

But Bank of America still faces a huge challenge in reinventing itself.

Fighting a languishing stock price, Lewis is under pressure from investors to show his bank can do more than buy up rivals. It has to prove it can be competitive in capital markets, private banking and other operations.

"Hiring a few people here and there isn't enough to generate a sea change in attitude toward Bank of America," said bank analyst David Stumpf of A.G. Edwards & Sons. "They've got a long way to go to convince Wall Street that they have changed their stripes. They have to be able to execute on a daily basis."

The bank's dilemma is nothing new. When corporations go through a changing of the guard, boards of directors like to alternate CEO styles. Often, companies shift between cost-cutters and team-builders, between dealmakers and operators -- in short, between McColl-style generals and Lewis-style managers.

It's often a difficult transition. Such corporate stalwarts as Procter & Gamble Co., Mattel Inc. and Coca-Cola Co. have fumbled as the baton was passed between CEOs, leading to quick tenures for the new chiefs.

Lewis has been groomed for the top job during his 32 years at the bank, including a stint in Tampa in the 1980s running its then-young Florida operation.

There's a downside, however, to that ingrained background. Lewis and his chief financial officer, Jim Hance, are part of the bank's old guard. So it's hard to convince outsiders that a new mission, let alone a new culture, is taking hold.

"As long as they are more interested in cutting costs and focusing on the bottom line issues, which of course is what investors want, there's always going to be a natural conflict," said Ken Thomas, a Miami banking analyst and longtime Bank of America critic."That's been a problem since they took over Barnett."

Thomas said he will continue to doubt a new BofA is emerging until he sees the bank lowering its fees and raising its CD rates to truly compete with smaller community banks.

Stumpf calls BofA the "poster child" for big bank problems. "Staying close to your customers and maintaining some level of customer service when you're that big is a challenge."

That's where Florida comes into the picture.

If Lewis and his top representative in the state, Bessant, can turn around their banking colony in Florida after the post-Barnett travails, the change could ripple through the organization.

The problems Bank of America faced in Florida were part logistical and part psychological.

The day the bank switched Barnett computer systems to its own, Oct. 9, 1998, was a nightmare. Barnett employees had trouble working the software for their new employer. Long lines were common at many branches because of a flawed model for predicting customer turnout. Customer service phone lines were jammed for weeks.

Competitors seized the moment, playing up the stereotype of the big, uncaring bank.

The bank's share of federally insured deposits in Florida slipped from 28 percent to 22 percent in the months after closing the Barnett deal. (The level of falloff was deceiving, however. Bank of America customers who used a program that shifts their deposits into a higher-yield money market account overnight were no longer counted as part of the bank's deposit share in Florida.)

Within months of the troubled conversion, McColl was issuing mea culpas to Floridians. Bank executives haven't stopped apologizing since.

"We put our customers through a lot in the last three years, and we made a lot of mistakes along the way," said Bessant, who took over the Florida operation from Adelaide "Alex" Sink.

Bessant, who oversees 800 branches and 20,000 employees throughout Florida, hasn't been afraid to shake things up. She chose to live and work out of Tampa, bypassing the bank's state headquarters in Jacksonville. Based on where the buck stops, she says she now considers Tampa as state headquarters.

The effort to win back customers ranged from spending $150-million for hiring new greeters and tellers at branches to putting copy machines back in branches after customers complained about the cost-cutting move.

Among other initiatives, the bank tried to stifle a chronic problem of tellers using the wrong paper deposit slips for payments. Today, almost all teller payments are made electronically.

The biggest home run for the Florida operation came in October when the bank began offering customers better rates through its money market deposit accounts. Deposits rose $1.4-billion in five months.

Bessant hopes to make the same kind of splash with the relationship lending experiment now under way in the state. No longer is a customer's credit rating the sole barometer for getting a mortgage or a home equity loan. The bank has begun looking at debt levels and whether the customer seeking a home equity loan already has, say, a checking account and credit card with Bank of America.

Within the next few months, loan officers will pore over records to reconsider customer loan applications that have been rejected on credit ratings alone. Their spiel, according to Bessant, will be straightforward: "We know we hacked you off. We denied your loan. We want another shot at it."

By more than one gauge, the turnaround is working.

Not only are customer complaints down, but the source of complaints has shifted.

The No. 1 complaint used to be rude bank employees. In the latest monthly tally, it was a statement glitch over fees for bounced checks.

Bessant said she does not doubt there was a problem with rude tellers and other customer service reps because they were a "frustrated" group. Talk about being customer-friendly won't matter, she said, unless the bank's front-line employees are happy and motivated.

Employee turnover was running at 47 percent when she arrived, Bessant said, and now it's at 32 percent.

To keep the troops happy, the Florida chief is borrowing a motivational tool from her old boss but putting a friendlier face on it.

Like McColl, she plans to present a symbolic award to those workers who go above and beyond the call. Instead of McColl's crystal grenades, though, she's begun stocking up on a new gift: kaleidoscopes.

- Jeff Harrington can be reached at harrington@sptimes.com or (813) 226-3407.

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