B of A Plans to Unload Its Institutional Trust Division : Banking: Potential bidders abound. The future is uncertain for the unit’s 2,000 employees, many of them in California.

BankAmerica Corp. plans to sell nearly all of its 2,000-employee institutional trust and securities services division, a move that would weed out what the company considers one of its lagging operations.

Officials said Sunday that the division, based in San Francisco, needs a major investment in computer technology to compete effectively against the financial giants that dominate the field. Instead of taking that path, however, B of A officials decided the company would be better off unloading the division and spending the money on a more promising venture.

“It’s a matter of weighing this investment against other potential investments,” B of A spokesman John J. Keane said.

Keane emphasized that B of A is “still in the very early stages” of looking for a buyer for the institutional trust division, but analysts said there are plenty of potential bidders.

The anticipated sale, however, puts in jeopardy the jobs of many of the unit’s employees working in the Bay Area, at four offices in Southern California, in seven other U.S. cities and in London.

Company officials said they could not immediately determine how many people the operation employs in Southern California, where it has offices in Los Angeles, Glendale, Pasadena and Costa Mesa.

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Word of B of A’s plans leaked out after company Vice Chairman Michael Rossi sent a letter to the division’s employees thanking them for doing “a fine job under difficult times and circumstances,” but also informing them that their unit no longer fit into the company’s plans. “Employment opportunities may or may not exist” after the sale, Rossi’s letter said.

The division’s main role, accounting for three-quarters of the $500 billion in its hands, involves such unglamorous “back office” tasks as maintaining custody of securities and clearing investment transactions for banks, insurance companies and other institutional investors.

It is a low-profit-margin business, and one that pays off only for those with the skills and technology to efficiently track massive numbers of investment transactions.

Another part of the division manages funds for corporations and government agencies. The only unit in the division that BankAmerica plans to keep is the one that handles 401(k) employee benefit trusts for mid-size companies.

Lawrence R. Vitale, an analyst with Bear Stearns & Co., lauded the company’s plans to sell most of the division. “This has been an elusive business for a lot of banks,” he said.

Officials at BankAmerica “must not feel they have the mass or efficiency to make it work,” Vitale added.

Noting that BankAmerica recently assured investors that it would focus on its most profitable businesses, Vitale said that company officials “are following through on their stated intentions, which is good. You always like to see a company do that.”

Vitale said potential buyers for the operation include such big banking companies as Bank of New York Co. and State Street Boston Corp.

BankAmerica has been in the institutional trust business for 60 years and expanded it with the 1992 acquisition of Los Angeles-based Security Pacific Bank and the 1994 purchase of Continental Corp. of Illinois.

The future of John Lloyd, the group executive vice president who heads the division, is unclear. Lloyd, a company veteran, is on disability leave recovering from injuries suffered in an auto accident in December.

Last month, BankAmerica announced record earnings of $2.18 billion for 1994.