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B of A Plans to Sell Schwab Brokerage Back to Founder

January 13, 1987|VICTOR F. ZONANA and JOHN M. BRODER | Times Staff Writers

SAN FRANCISCO — BankAmerica tentatively plans to sell its Charles Schwab & Co. discount brokerage unit back to company founder Charles R. Schwab for about $250 million, BankAmerica sources said Monday.

Meanwhile, Executive Vice President Stephen T. McLin, BankAmerica's outspoken chief strategist who engineered the acquisitions of Schwab and Seafirst Corp. in Washington state, said Monday that he will leave the troubled bank.

McLin, 40, will become president of America First Financial Corp., a newly organized San Francisco-based venture capital affiliate of America First Cos. of Omaha, Neb. The new unit expects to raise up to $500 million for investment in struggling banks and savings and loan firms.

McLin's resignation and the impending sale of the Schwab brokerage can both be traced to the board of directors' October dismissal of former BankAmerica President Samuel H. Armacost, a close friend and mentor of the departing strategy chief. Armacost promoted McLin to executive vice president from senior vice president last August.

In 1985, McLin was BankAmerica's third-highest paid executive, receiving $285,330 in salary.

The 1983 acquisition of Charles Schwab & Co. by BankAmerica for $53 million made its boyish founder a millionaire and gave him a seat on the bank's board of directors. But the impatient entrepreneur quit the board last summer after a stormy two years in which he publicly and privately criticized management and the board for failing to take strong steps to reverse the bank's heavy losses.

Armacost had repeatedly ruled out the sale of the Schwab firm, saying that the profitable unit was essential to BankAmerica's future.

But BankAmerica Chairman A. W. Clausen, Armacost's successor, almost immediately put Schwab on the block as part of an accelerated strategy of selling "non-core" subsidiaries to raise capital, stem the bank's massive losses and ward off a hostile takeover attempt by Los Angeles' First Interstate Bancorp.

Schwab has assembled an investor group to finance the buyback of his company, an associate said. Schwab will be majority owner and will continue as chief executive.

The brokerage unit, which has more than a million individual customers around the country, is expected to report 1986 profits of about $26 million, Schwab company sources said.

Friendly Parting

McLin said his departure was amicable and unrelated to the bank's decision to sell Schwab. In a prepared statement, McLin said he had decided to leave "with great regret" after he was given the chance to run his own company.

"The bank's recovery along an independent path is well under way," he said. "I fully support BankAmerica's desire to remain independent and its current efforts to rebut the hostile First Interstate offer."

McLin will remain a director of three BankAmerica subsidiaries, an indication that his departure was friendly.

Separately, BankAmerica officials are circulating projections that show the company will report a profit for the fourth quarter of 1986 because of last month's sale of its Italian banking subsidiary. But company officials said the bank will continue to show losses from operations--in excess of $100 million for the fourth quarter.

The bank lost $600 million during the first nine months of 1986.

Meanwhile, BankAmerica is preparing to file a registration statement with the Securities and Exchange Commission for a new issue of securities worth about $500 million, BankAmerica sources said. The securities probably will consist of preferred stock or notes that will be convertible to common stock at a later date.

The securities are designed to bolster the company's weak capital position without diluting the value of current stockholders' stock, company officials said.

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