BankAmerica's board of directors met into the evening Monday to weigh the bank's future amid indications that President Samuel H. Armacost's job is safe--for now.
The 21-member board considered a proposal from New York financier Sanford I. Weill to raise $1 billion in new capital for the troubled bank in exchange for its presidency. But Armacost reportedly fought back with a vigorous defense of his record and detailed his own plans for renewed growth at the bank over the next three to five years.
BankAmerica is the parent of San Francisco-based Bank of America, the nation's second-largest bank.
Sources indicated that the board debated the possible formation of a special directors' committee to study the bank's various options.
There was reported to be growing sentiment among board members that the bank must take some forceful action to halt a decline that led to $337 million in net losses last year.
Meanwhile, BankAmerica's stock gave up part of its recent 40% gain as speculators apparently concluded that an immediate change in management or a tender offer for the company was not likely. The stock fell $1.25 on Monday to $16.375 on heavy volume.
Management adroitly deflected Weill's offer to raise new capital, at least temporarily, by presenting letters containing capital commitments from three investment banking houses, bank officials said.
"If we didn't have confidence in present management, we would not have written the letter we did," said Charles Nathan, a managing director of Merrill Lynch Capital Markets.
Still, despite public claims of confidence, investment bankers privately predict that Armacost will be gone in six months to a year if the bank does not show a strong turnaround.
"The real-life problem is that the board is nervous and has to do something," said one investment banker who has worked closely with the bank. "Sam (Armacost) may be dead, and Sandy (Weill) may have killed him, but that still doesn't mean that Sandy is going to get the job."
Rather, informed observers predicted that the board will likely turn to an outsider other than Weill if the recovery Armacost is promising fails to materialize. Although many names have surfaced, the candidate given most credence recently is Frank V. Cahouet, the veteran turnaround artist who heads Crocker National Bank in San Francisco. His job is being eliminated as Crocker is absorbed by Wells Fargo & Co.
"Cahouet's name kicking around doesn't help Sam, that's for sure," an investment banker with ties to both men said. What's more, he added, "Cahouet wants it."
Said another investment banker ostensibly working for Armacost: "Cahouet was a natural for the job even before he got trashed by Midland," the London bank that sold Crocker to Wells Fargo.
Cahouet could not be reached for comment.