Mega-merger creates biggest American bank

Spotlight turns on UK groups after Wall Street deals launch two new US giants

THE CURRENT bout of consolidation in the US banking industry took on an air of near panic yesterday morning as two mega-mergers were announced within an hour of each other, creating America's first and fifth biggest banks.

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.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas