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Bank of America execs writing a new corporate script

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© St. Petersburg Times, published December 13, 2000

No one would confuse Bank of America chief Hugh McColl Jr. with banker George Bailey, the Jimmy Stewart character in It's a Wonderful Life.

Bailey was tall. McColl is not. Not exactly separated at birth.

That did not stop the Charlotte Chamber of Commerce from using the vintage Christmas-time movie at its annual meeting this month to celebrate McColl's life story. Scrapbook pictures of the revered Charlotte, N.C., banker were spliced into clips of the film.

In the fictional movie, Bailey's family-run building and loan went through some tough times. In the real world, Bank of America is now struggling more than it ever imagined.

Hmmm. Maybe there's more to this Bailey-McColl connection than first meets the eye.

Last week, the new generation of Bank of America's top executives (president Ken Lewis and chief financial officer Jim Hance) traveled to New York's Pierre Hotel and faced a room full of skeptical Wall Street analysts.

The bankers warned that mighty Bank of America may face up to $1.2-billion in fourth-quarter loan losses. And they said next year was not going to be a banner year either. Not even close.

Bank of America's not alone. First Union's hurting. So is the Midwest's Bank One. More banks will start to report troubled lending soon, too.

It's all your fault, readers.

If you all had just thrown more burgers and bratwursts on the patio grill, then none of Bank of America's financial headaches ever would have happened.

Stay with me now.

Had you cooked more meat outdoors, you'd have bought more gas grills.

Had you bought more gas grills from Sunbeam, the Florida appliancemaker would not be on the brink of ruin.

Had Sunbeam been stronger, its big lenders -- Bank of America among them -- would not be preparing to write off such a hefty load of bad loans.

It does not help that Bank of America also loaned money to other troubled borrowers such as Regal Cinemas, Owens-Corning, Pillowtex and Armstrong World Industries, the floor coverings giant that filed for bankruptcy protection last week.

Had Bank of America made better lending decisions, employee morale at the megabank would not be so poor. And maybe the U.S. economy would not be slowing quite as quickly as it is.

* * *

To be fair, Bank of America is in the midst of a corporate-culture shift that would make the tasks of Hercules look easy.

How does a company fixated on size transform from an aggressive buyer of other banks into a high-performing institution that delivers top day-to-day service?

How does a hulking Warren Sapp morph into the finely tuned Pedro Martinez?

Can the Godzilla of U.S. banking learn to dance like Fred Astaire?

So far, Wall Street has not heard the right answers from Bank of America. That's why its stock is drooping. Its price-earnings ratio is a paltry 9.11. And its market capitalization (stock price times shares outstanding) is a mere $71-billion.

Contrast those numbers with another big institution, New York's Citigroup, with a P/E ratio of 19.7 and a market capitalization of $236-billion.

"We know investors have issues with us," Lewis told the Wall Street analysts. "Our P/E ratio screams that message, and we've gotten it."

After Lewis and Hance delivered the bad news in New York, the execs sent bank employees an internal memo that tries to explain a difficult situation. "To My Teammates," reads the Lewis memo.

"Today, we are growing another way: by winning more business from more customers, one at a time," the memo says. "Unlike a merger, this kind of growth can't be planned and executed by small groups of people in management or on transition teams. . . . Our success depends on each and every one of us adapting to new ways of doing business and maintaining a single-minded focus on serving our customers better and better, every day."

Buck up, Lewis urged. "Times are tough. But I know from my many visits and talks with our associates across this company that we are tough as well."

Last summer, Bank of America stunned its work force when it unveiled plans to cut 10,000 jobs. Most of those employees were shown the door this fall.

In an internal question-and-answer memo, Bank of America asks if more job cuts are coming. The bank does not answer its own question but states: "Today's announcement was simply to provide additional guidance to investors concerning our financial performance projections for the fourth quarter and 2001."

That non-answer must make some Bank of America employees uneasy.

The memo even asks if the bank, given its weak stock price, is vulnerable to a takeover. No, the memo insists.

In another internal memo, Bill Vandiver, the bank's head of corporate risk management, concedes things could deteriorate.

"If the economy worsens more than expected, we would clearly be in a much tougher environment for credit, which would impact all financial institutions," he says, and adds:

Q: Are we tightening up on credit availability and raising standards for borrowers?

A: The simple answer is yes.

To help in its transformation, Bank of America honchos are betting on the outside talents of consultant Michael Hammer.

Hammer wrote such management books as Reengineering the Corporation, and he is pushing a very "process-oriented" reorganization at the bank.

Will such remedies work? Can the team of Lewis and Hance and Hammer -- and yes, even McColl -- manage to teach an old Bank of America new tricks?

We will not know until well into next year.

In Charlotte, the New South city is quite unaccustomed to the weakness of its great big banks. Bank of America execs are not quite used to the feeling, either.

Inside the bank's towering headquarters, for now, it's no longer a wonderful life.

- Robert Trigaux can be reached at (727) 893-8405 or

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