B of A May Boost Loan-Loss Reserve, Chief Tells Holders

SAN FRANCISCO —  BankAmerica Chairman A. W. Clausen insisted Thursday that the company’s current reserve for loan losses is adequate but acknowledged that the company might boost it to alter a widespread “perception” that the reserve is too small.

“We are continuing to monitor conditions in the developing countries, together with industry trends, and will adjust our reserves if appropriate,” Clausen said at the company’s annual meeting of shareholders.

Such an increase in the reserve, he said, “would cause a loss for the accounting period.”

Citicorp last week set off a bombshell in banking industry circles by unilaterally adding $3 billion to its loan-loss reserve to cover potential losses on foreign loans. Chase Manhattan made a similar $1.6-billion increase Wednesday.

Clausen made clear his distaste for Citicorp Chairman John S. Reed’s go-it-alone approach to the world debt crisis. “It is in everyone’s self-interest to work together,” the chairman of the nation’s second-largest bank holding company said.

A combined net loss of $855 million in 1985 and 1986 has severely weakened the troubled parent of Bank of America. As a result, some analysts believe that BankAmerica would be less able to withstand a special addition to its loan-loss reserve than its peers.

The company previously reported a loan-loss reserve of $2.2 billion, or 3.16% of its assets, as of March 31. At that time, BankAmerica’s reserve was the highest of major banks, but the recent Citicorp and Chase actions put them ahead.

The foreign debt situation, however, was overshadowed by raucous crticism of BankAmerica’s management and board of directors during the 3-hour shareholder meeting here.

Clausen, who led BankAmerica during the 1970s, was brought back by directors last September after a five-year term as head of the World Bank. His assignment was to return the bank to profitability and fend off a takeover bid by Los Angeles-based First Interstate Bancorp.

Some Shareholders Irked

Clausen tried to differentiate his new management team from the one headed by his one-time protege, Samuel H. Armacost, who resigned last September. But most shareholders who took the floor to ask questions--and who have seen the value of their stock plunge and their dividends eliminated in recent years--were not placated.

The chairman allowed shareholders to vent their anger, never invoking a rule limiting questioners to two minutes apiece.

Several shareholders called on Clausen to resign. Another challenged the chairman to take a salary cut to $50,000 a year from $525,000 until the bank gets back on its feet. A third demanded that Clausen, as a symbolic gesture, give up his chauffeured limousine.

Clausen refused. The cost of the car and driver, he said, is “a peanut, a grain of sand.”

Many shareholders expressed outrage at the $1.6-million “golden handshake” the board awarded Armacost when it deposed him as president and chief executive.

Clausen drew boos and catcalls when he defended the loss-ridden company’s award to Armacost as “not abnormal.” The round-faced banker visibly reddened, and embarrassed directors fidgeted and starred at the ceiling.

There was more. Nick Rossi of Booneville, Calif., assailed Clausen for selecting “Boy Blunder Armacost,” and called BankAmerica “one of the sorriest examples of management in U.S. history.”

Clausen drew groans when he said dividends would not be restored “this year and maybe not even next, but as soon as possible.” But he insisted that after five years of worsening results, BankAmerica’s recovery has begun.

“I recognize the frustration of all in this room,” Clausen said. “I offer no excuses for the performance of this corporation.”