Business Notes: Jul. 29, 1985

BANKING Record Red Ink at Bank America

The troubles of financial giant BankAmerica were hardly a secret. A red tide of loan losses has swelled over the past four years, and Chairman Samuel Armacost last month forecast little or no profit for the second quarter. Still, the financial community was stunned when BankAmerica last week announced a net loss of $338 million for that period. It was the second-worst quarterly deficit in U.S. banking history (after Continental Illinois' $1.1 billion loss in the second quarter of 1984).

As recently as 1979, California's BankAmerica was the world's largest and most profitable financial company, but it has since slipped behind New York's Citicorp, mainly as a result of losses from loans not repaid by developing countries and by such troubled industries as agriculture, real estate and shipping.

BankAmerica's huge losses make other financial institutions nervous, in part because of the company's size. Several major banks are worried about their own shaky loans and about what may be a tough new attitude among federal bank regulators. While BankAmerica wrote off $382 million in bad loans in the second quarter, more of its troubles resulted from regulatory pressure to increase its loan-loss reserve by $527 million.

The 1.3 million-member United Food and Commercial Workers union trusts that the American public will listen to Mama. In an effort to communicate with the public about issues that affect labor, the organization has hired Actress Vicki Lawrence. She will portray the irascible, aggressively cracker-brained character Mama, whom she played first on the Carol Burnett Show and later on her own sitcom Mama's Family, in a series of light but straight-talking television commercials on themes such as union organizing, foreign takeovers and brand boycotts. Lawrence, a Reagan Republican, signed a one-year, $150,000 contract with the anti-Reagan union. "This is not Democratic or Republican," says Lawrence. "It's American."

U.F.C.W. President William Wynn says that the ads mark the first time that a union has used a television character to help sell its views. Frustrated by his organization's inability to reach the public, Wynn thought that the humorous character of Mama would attract the right audience and be able to simplify complex issues. "We're going to go where the public is," says Wynn, "and that's in front of the television set. Every one can relate to Mama."

The health-care industry is bubbling with billion-dollar mergers. American Hospital Supply, the nation's largest distributor of hospital supplies, agreed last week to merge with Baxter Travenol Laboratories, the third-biggest hospital-supply company, in a deal valued at $3.8 billion. Monsanto has also agreed to acquire G.D. Searle for $2.7 billion, giving the chemical giant a long-desired place in the Pharmaceuticals market.

The Baxter merger put an end to American Hospital's four-month-old plan to combine with the Hospital Corp. of America, the nation's largest for-profit hospital chain. Baxter Travenol's $51-a-share offer, $15 more than HCA's previous bid, was grudgingly accepted by the American Hospital board only after irate stockholders, led by Financier Carl Icahn, threatened to throw out the board of directors.