Bank mergers transform industry

The aptly named NationsBank Corp. and BankAmerica Corp. took a giant leap for the banking industry yesterday in a $62.8 billion merger creating the country's first coast-to-coast bank.

In the heart of the new No. 1 American bank's territory, another giant also was born as Banc One Corp. and First Chicago NBD Corp. announced a $28.8 billion merger to create the Midwest's most dominant bank.

The two deals come just a week after Citicorp and Travelers Group said they would combine their sprawling banking, insurance and brokerage businesses into the nation's biggest financial company. The latest mergers increase the pressure on smaller banks to consolidate so they too can provide broad financial services.

"This is the first giant stride to bring both coasts together under one banking franchise," said Michael Ancell, a banking analyst at St. Louis investment bank Edward Jones. "Everybody knew it was coming, but when it finally happens it's kind of a breathtaker."

The mergers fueled speculation about future coast-to-coast or even global deals in which giants absorb midsized banks. Among major banks, San Francisco-based Wells Fargo & Co. and Seattle-based Washington Mutual Inc. also were seen by analysts as potential targets.

"There's no doubt there will be more transactions like this," said Corey Yulinsky, who follows the industry for Mercer Management Consulting in New York. "We are going to see some really mega-institutions and some small community banks."

Behind this month's wave of mergers - the three largest ever in the financial services business - is convenience. Banks want customers to have access to their branches and ATMs when traveling and want to provide services such as insurance or investment advice along with savings and checking accounts. The deals come as Congress is trying to remove Depression-era barriers that block banks from getting fully into the insurance and brokerage businesses.

The BankAmerica-NationsBank merger would be the second-largest corporate marriage ever behind the planned $74.4 billion Citicorp-Travelers combination, to be called Citigroup. BankAmerica and NationsBank would have $570 billion in combined assets, surpassing Chase Manhattan Corp. as the biggest U.S. bank.

In addition to setting the stage for a spate of catch-up U.S. mergers, the deals are seen as giving the newly grown banks more power to expand overseas. The new Citigroup and BankAmerica have strong overseas businesses, but America's largest banks are still behind Japan's Bank of Tokyo-Mitsubishi and the proposed United Bank of Switzerland in the global ranks.

NationsBank, based in Charlotte, N.C., has its strength across the nation's south and midsection. BankAmerica spreads east from its San Francisco base. The combined bank, which will take the BankAmerica name, will operate in 22 states, with 4,800 branches and 15,000 automated teller machines.

"Both of our companies have believed in the idea of nationwide banking for a long time," said NationsBank chair Hugh McColl, whose aggressive company purchased Southern rival Barnett Banks Inc. and Boatmen's Bancshares in the Midwest just last year.

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