US banks in $1.6bn merger

DAVID USBORNE

New York

Giving fresh momentum to the spate of US bank mergers, NationsBank announced yesterday that it was reinforcing its already powerful position in the American South with the purchase of Bank South Corporation for $1.6bn.

Based in Atlanta, Georgia, NationsBank is already America's third-largest bank with assets of $185bn. Though much smaller with assets of only $7.4bn in assets, Bank South has a strong retailing spread in the Atlanta region, with more automatic cash machines than any of its competitors. Unusually, 60 of its branches are inside supermarkets.

The deal, which has been unanimously approved by both the banks' boards, will involve a tax-free stock transaction, under which each share of Bank South common stock will be traded for 0.44 shares of NationsBank common stock.

Analysts expect the current trend of consolidation in the banking sector to continue unabated. A week ago, Chemical and Chase Manhattan banks in New York announced they were to combine to create the country's largest bank, edging ahead of Citibank.

Earlier, First Union Bank purchased the New Jersey-based First Fidelity.

With the acquisition of Bank South, NationsBank is manoeuvering to get itself in prime shape ahead of next year's Olympic Games in Atlanta, at which the bank will be a big-name sponsor. It hopes to gain publicity at the Games as one of America's foremost banking powerhouses.

Ken Lewis, president, said: "What this merger will produce is a financial institution with the ability and the commitment to be a full partner in promoting economic growth throughout Atlanta.