US banks in grip of merger mania

THE US banking industry has been bitten by the "bigger-is-better" merger bug, with banks combining at a record pace this year in a frenzied rush to cut costs, expand market share and compete better with other financial institutions.

Speculation last week about a $22bn (pounds 14bn) link-up between NationsBank and BankAmerica is just the latest ripple in a flood that has swept the sector. Already in 1995, there have been $42bn worth of publicly announced mergers - an all-time record - and there are still two months to go. So far, 300 banks across the country have made deals, and those not yet betrothed are nervously eyeing the field for possible partners.

It is a process transforming the US banking landscape. There are 10,168 different banks in the US today, still a high per capita number but significantly down from 14,417 10 years ago. If the merger mania continues, the number could fall by another 50 per cent by the end of the decade, according to a study from the consulting firm, Deloitte & Touche.

Most dramatic so far has been the proposed fusion of Chase Manhattan and Chemical Bank in New York, which is slated to create the largest US bank with assets of almost $300bn, topping the current number one, Citicorp, by about $40bn. Other notable marriages have been between First Union and First Fidelity, Nationsbank and Bank South, and First Chicago and NBD.

To underline the urgency of the trend, Wells Fargo launched an unusual hostile takeover bid earlier this month for its California rival, First Interstate, with an offer three times Interstate's book value. That combination would create America's eighth largest bank, but in recent days First Interstate has begun a search for a white knight to fend off Wells Fargo. Other possible contenders include Norwest Corporation and Banc One.

Fuelling the takeover binge is new legislation liberalising banking laws, which have traditionally kept US banks strictly contained within their state borders. Now banks are free to buy each other across state lines, and from 1997 they will be allowed for the first time to open branches in states across the country.

Meanwhile, the merger mania has had a galvanising effect on bank stock prices, which have risen by an average of 44 per cent this year.

Where bank mergers are concerned, every rumour is taken seriously. Early last week, the markets leaped on speculation that NationsBank, based in Charlotte, North Carolina, and BankAmerica of San Francisco, were in talks to tie the knot to create what would be America's first bank with a truly national presence. Shares in both banks briefly shot up in trading, even though the story originated from anonymous sources.

The two banks are known to have pondered a merger - the deal, worth $22bn if completed, would have been the secondbiggest in corporate history. But when analysts looked coolly at the potential, the market's ardour cooled.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Books should be for everyone, says Els, 8. Publisher Scholastic now agrees
booksAn eight-year-old saw a pirate book was ‘for boys’ and took on the publishers
Life and Style
Mary Beard received abuse after speaking positively on 'Question Time' about immigrant workers: 'When people say ridiculous, untrue and hurtful things, then I think you should call them out'
tech
Life and Style
Most mail-order brides are thought to come from Thailand, the Philippines and Romania
life
News
i100
Life and Style
tech
Voices
Margaret Thatcher, with her director of publicity Sir Gordon Reece, who helped her and the Tory Party to victory in 1979
voicesThe subject is being celebrated by the V&A museum, triggering some happy memories for former PR man DJ Taylor
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Recruitment Genius: Administrator - IFA Based

£22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions