Mega-merger creates biggest American bank
Spotlight turns on UK groups after Wall Street deals launch two new US giants
Tuesday 14 April 1998
BankAmerica and NationsBank agreed to merge in a $60bn stock swap, creating the largest bank in American history with $570bn in assets.
The news followed Banc One's own $29bn merger agreement with First Chicago NBD and came just one week after the $70bn merger between Citicorp and Travelers Group.
The news sent bank shares surging in early trading in the US while the rest of the market on Wall Street, in contrast, suffered a poor day. BankAmerica rose $5 to $91.625 and NationsBank gained $5.9375 to $82.375. Banc One shares rose $1.6875 to $63.875 after its own announcement. Merrill Lynch joined in the action by jumping $4.625 to $99.5625 after the brokerage reported first-quarter earnings ahead of Wall Street estimates.
Shares in British banks are also expected to soar today when the London stock market reopens after the bank holiday weekend. Those seen as potential merger targets include NatWest, Barclays, Royal Bank of Scotland, and Alliance & Leicester. Insurers and investment banks are also likely to attract attention, now that cross-selling within one umbrella institution seems to be back in fashion.
More American banks are expected to be swept up in the merger mania, with names like Chase Manhattan and JP Morgan being touted as possible candidates on Wall Street. Analysts said the most powerful spur was the lack of any obvious alternative strategy.
"There's not a lot of revenue growth in banking," said Diane Glossman, an analyst at Lehman Brothers. "People are looking for a variety of ways to pump up revenues and come up with the means to spend on technology."
NationsBank, based in North Carolina, and BankAmerica, based in San Francisco, said their merger would not result in any earnings dilution and would establish a company with $45bn in shareholder equity and a market capitalisation of $133bn.
Hugh McColl, chief executive of NationsBank, who will become chairman of the merged bank, predicted: "Our earnings will approach $10bn in our first year together. We will serve 29 million households and 2 million businesses. We will rank number one by a wide margin in domestic deposits with an 8.1 per cent US market share."
He said: "This is a watershed in the financial services industry. Together we will be America's bank."
David Coulter, chairman and chief executive of BankAmerica, said population growth in the two regions served by the banks would be a major factor, estimated to grow by 9 million people between 1996 and 2001.
John B McCoy, chief executive officer of Banc One, said yesterday that once the merger with First Chicago NBD was complete, the merged company might seek more acquisitions. He also stressed the need to create a cross- selling financial services group. "That's really what we want to provide - one stop shopping," he said.
When asked whether the bank would look to buy a stockbroker or move into other regions, Mr McCoy said: "I think it's very possible that we will look at a number of areas and those that help us be national, those that fit in with our strategy are very logical to do."
He said the merger with First Chicago would result in fewer employees for the combined company, but that much of the reduction was likely to come through attrition.
"Most everyone who has a job today that wants a job will still be able to be employed because this transaction will take five months to get approved," he said. "So with attrition and everything, I think most of the employees will be very comfortable."
Banc One, based in Columbus, Ohio, will own 60 per cent of the new company, which will be based in Chicago. The merged bank will have 2,000 branches and be the US's biggest lender to small businesses. It will also be the second-largest credit card issuer, second only to Citigroup.
The deal was struck after both companies had difficulty increasing revenues after earlier mergers. First Chicago merged with Detroit-based NBD in 1996, a merger of equals that didn't perform as well as expected. Banc One last year imposed more central control over its once-independent local banks and bought the country's third-largest credit card company.
John B McCoy will become chief executive and president of the company. First Chicago chairman and chief executive Verne Istock will become chairman.
As if to emphasise the global nature of banking consolidation, Greek shares soared yesterday after Bank of Piraeus unexpectedly offered the highest bid for a controlling stake in Macedonian Thrace Bank, a bank controlled by three state banks.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Germany sees 'visible rise' in support for far-right extremism in response to perceived 'Islamisation' of the West
iJobs Money & Business
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...
£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...