Intergration between Bank of America and U.S. Trust

The top executive at U.S. Trust, a private-banking operation being acquired for $3.3 billion by Bank of America Corp., has decided to quit this summer, dealing a setback to the big bank's ambitious push to become the leader in the lucrative business of managing rich people's money.

Bank of America has lacked a renowned private-banking name, and has struggled to persuade clients that its private bank offers the type of personalized service they expect. The Charlotte, N.C., bank pitches its size as a benefit, since it can approve large personal loans, but that heft also means clients often are steered toward a suite of the bank's own products.

U.S. Trust, founded in 1853, counts some of America's oldest dynasties among its clients -- including the Astors and Whitneys -- and requires a minimum of $2 million to open an account. The firm has about $93 billion of client assets. Bank of America's private bank has about $171.8 billion under management.

One of the biggest clashes between Mr. Scaturro and Mr. Moynihan revolved around investments. Mr. Scaturro wanted wealthy clients to have their own set of financial products, ranging from stock and bond portfolios to hedge funds and private-equity investments. Mr. Moynihan wants to centralize the investments to serve a broader group of bank customers.
Mr. Moynihan described the model in a February presentation to investors, breaking clients into segments with investable assets of $100,000 to $3 million, $3 million to $50 million and more than $50 million.

Despite his decision to quit, Mr. Scaturro is entitled to a lump sum of $8.95 million in cash and shares valued at $3.3 million when the deal closes, according to his agreement with Schwab. Under Mr. Scaturro, U.S. Trust's earnings jumped to $190 million in 2006 from $146 million in 2005. Bank of America has described its private bank's earnings growth as "sluggish," and the unit's net income fell last year by 1%, or $6 million.

After announcing the deal, Mr. Moynihan told analysts on a conference call that the bank planned to "keep the U.S. Trust legacy, keep the identity," and to run a "unified business across the entire wealth spectrum under Peter's leadership."

But his and Mr. Scaturro's vision of how to treat this specialized clientele clearly differ. For one thing, Mr. Moynihan's mantra is "scale": Mechanization and a one-size-fits-all product suite has made Bank of America excel in such areas as branch and business banking, where products are commodities and where "customer delight" scores are scrutinized.

Mr. Scaturro, by contrast, preaches "specialized service" to millionaire and billionaire clients who demand constant attention and performance. The company's marketing events include intimate dinners for clients with top authors or politicians, private concerts and cocktail parties at its Manhattan townhouse.

Mr. Moynihan, according to people familiar with meetings held to orchestrate the banks' integration, viewed some of U.S. Trust's marketing events as overly costly and ineffective.
Bank of America, and its predecessor NationsBank, has been among the most aggressive at categorizing its "rich" clients -- from super-rich down to merely rich -- and tailoring services along those lines, which has meant some people accustomed to personal bankers end up steered to toll-free phone numbers for service.

Bank of America reached its unprecedented size through more than 20 acquisitions during the 1980s and 1990s. As the bank scurried from one deal to the next, it hemorrhaged customers of companies it had paid dearly to acquire.

Mr. Lewis has made integrating acquisitions a top priority in his six years at the helm, and Bank of America seems to have made progress in absorbing aspects of acquired companies' cultures. The bank boosted its share of New England customers after it bought FleetBoston Financial Corp. in 2004, in part because it adopted a popular integrated statement that showed all of a wealthy customer's accounts.

Still, Mr. Lewis remains leery of letting any unit operate under a different culture or name, and was loath to let U.S. Trust stand alone.