Cutting Ties: Schwab leaves BankAmerica

• Share

The announcement was bland enough: Charles Schwab, probably the country's best-known discount broker, resigned last week from the 15-member BankAmerica board "to devote undivided time and attention" to the brokerage firm bearing his name, which he sold to the same bank in 1983. But in fact the move had more subterranean implications for the No. 2 banking company in the U.S., which shocked the investment world last month with a second-quarter loss of $640 million. Schwab's sudden departure seemed to be another sign of a muted power struggle at the huge (assets: $117 billion) San Francisco-based bank. At issue is the course being charted by the firm's chief executive, Samuel Armacost, as he struggles to engineer a recovery.

Schwab's board seat had been part of the price for his widely advertised firm, Charles Schwab & Co., which BankAmerica bought with $55 million worth of its own shares. The handsome, articulate Schwab, 49, also stayed on as chairman of the discount brokerage, and has turned it into one of BankAmerica's minor gems (1985 profits: $11.4 million), with himself starring in the brokerage's television commercials. But the marriage soured as BankAmerica's fortunes plummeted, and the entrepreneurial Schwab earned a reputation as something of an impatient boardroom maverick. Indeed, he was known to have sold off most of his 850,000 BankAmerica shares last year.

Schwab has persistently criticized fellow Bank-America board members for indecision in cutting staff and closing branches to stem the company's hemorrhage of red ink. In February, Schwab was among the minority who backed an unsuccessful bid by Sanford Weill, the former president of American Express, to infuse the bank with $1 billion in new capital in exchange for the chairmanship. Says Banking Analyst Joseph Arsenio of San Francisco's Birr, Wilson investment house: "Schwab had to be frustrated with the gradualist approach taken by management and the other directors."

He may not have been the only one. Two days before Schwab left, John Poelker, BankAmerica's chief financial officer, resigned after less than six months on the job. Poelker's stated reason for quitting was to spend more time with his family.

If nothing else, Schwab's resignation focuses renewed attention on BankAmerica's troubles, which can hardly give much comfort to Armacost. Some banking analysts are now predicting a major financial restructuring at the ailing giant, perhaps as early as Thanksgiving.