Bank mergers may affect job market

Three of the largest banking mergers in history were the buzz this week on Wall Street, but experts say the effects of the banking industry's consolidation will be felt in cities outside the nation's financial capital - including Ann Arbor.

The financial press reported Monday that BankAmerica Corp. and NationsBank Corp. agreed to join forces in a $60 billion merger, and that Banc One Corp. and First Chicago NBD Corp. will combine in a $30 billion transaction. These transactions come in the wake of Travelers Group Inc. and Citicorp's record-setting $70 billion merger last week.

Finance assistant Prof. David Brophy said the new financial services firms will increase efficiency by streamlining overlapping operations. He said streamlining may make fewer jobs available in the short run to students seeking to enter the banking

SARA STILLMAN/Daily Ann Arbor resident Yukari Nibun uses the National Bank of Detroit ATM on Main Street yesterday, one day after it merged with Banc One Corp.

industry.

"If you put bank A and B together they'll be looking to eliminate jobs, and there will be bankers put out onto the street," Brophy said. "In the short run, its going to be tough (for college graduates) to get jobs (in banking). If nothing else, it'll put downward pressure on starting salary."

The banking mergers have the potential to affect the careers of thousands of students and alumni.

Terri Lamarco, Career Planning & Placement's associate director for employer relations, said investment banking is the second highest field of interest at CP&P, with 400 of 1,200 students registered to use the career center's services that list it as a field of interest. She said commercial banking is also a popular career choice.

The School of Business and Administration's Office of Career Development reports that almost 281 students, one third of all graduates, entered banking and financial services in 1997.

LSA senior Vijay Jayaraman said he considered the effects of a potential merger before accepting a job offer from Goldman Sachs, a privately owned investment bank.

"Rumors were flying around about (the possibility of a firm purchasing) Goldman, but I was assured they were not true," Jayaraman said. "There's always that concern because these kind of things, like the mergers this week, can just pop out of the blue."

Brophy said he expects the merger wave to continue, and said the national focus of the merged banks will make opportunities available for small, specialized financial services firms to fill niches in more localized geographic markets.

"You'll see new regional investment" and commercial banks, Brophy said. "Students would be well advised to look locally and regionally as well as nationally for work."

Finance Prof. Nejat Seyhun said the goal of the past week's mergers was not to cut jobs, but to capitalize on new cost advantages made possible by technology.

"The optimal size of the bank is getting bigger," Seyhun said. "The idea (behind the mergers) is not to eliminate operations ... it's more to combine technology and take advantage of economies of scale. Citigroup can, for example, sell insurance out of bank offices."

Seyhun said that although "size doesn't guarantee success," he believes the country's 10,000 banks will be replaced through mergers by approximately 10 national banks. Seyhun said cost savings may lead to lower fees for consumer services such as checking.

The mergers are "good for the banks, and not bad for consumers," Seyhun said. "If more banks (decide to merge), banks in competition with each other may drive prices for services downward."

Brophy said the mergers will open possibilities for banks to enter new markets and may make it easier for students wishing to start a small business to secure loans.

Banks "might be able to go into markets they weren't able to go into before - like (loans to) small businesses - because they will have more available capital and more elaborate portfolio investment strategies," Brophy said.

04-15-98