Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, October 24, 1995 TAG: 9510240053
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: SAN FRANCISCO LENGTH: Medium
If consummated, the marriage would put a U.S. institution in the world's top 10 banks for the first time in years.
The merged bank would rank ninth in the world and No. 1 in the United States, acing out the planned merger of Chemical Banking Corp. and Chase Manhattan Corp., which would create a bank with $297 billion in assets. It also would dwarf the nation's largest bank, New York-based Citicorp., with $257 billion in assets.
The Los Angeles Times and Barron's magazine, quoting unnamed sources, reported Monday that San Francisco, Calif.-based BankAmerica and Charlotte, N.C.-based NationsBank have been discussing a merger.
One NationsBank director told Barrons his institution has talked with several potential partners, but BankAmerica would make the best fit.
BankAmerica sources said there is no guarantee of a deal. The bank has recently come close to closing other major deals that eventually fell apart.
Spokesmen at both banks declined to comment.
The rumors received mixed reaction from bank analysts, but investors warmed to the idea and bid up the stock of both companies.
BankAmerica stock rose Monday by $1.50 to $64.121/2 a share and NationsBank rose 75 cents to $70.75 a share on the New York Stock Exchange.
Giant bank mergers have become commonplace in recent months, as banks scramble to increase market share and compete with businesses such as AT&T and Charles Schwab, which offer credit cards and other bank-like products.
New interstate banking laws and rising prices of bank stocks - the currency banks use to buy each other - are also factors driving the deals.
But many recent mergers involve institutions operating in the same or neighboring markets, which allows the new bank to save money by cutting overlapping staff and branches.
A merger between BankAmerica, the nation's second largest bank, and NationsBank, the third largest, would combine banks on opposite coasts and create a nationwide network of branches with little overlap.
The combined bank thus couldn't cut expenses by closing branches and trimming both operating and payroll costs. That turned many bank analysts against the possible deal because they like mergers that will create banks with lower costs.
A BankAmerica-NationsBank combination would create a behemoth that would be difficult to manage and expensive to run, they said.
``I can't say that I see any logic in it,'' said Merrill Ross of Wheat First Butcher & Singer in Richmond. ``There's no branch overlap to speak of and that's where the best savings come from.''
She said the greater name identification that would come with having branches coast to coast would not offset the hassles of trying to manage such a tremendously large institution.
But analyst Steve Didion of Hoefer & Arnett in San Francisco said the lack of branch overlap is precisely what makes the merger a good idea. Together, the two will blanket most of the United States without having to buy up several smaller banks at greater expense, he said.
The two banks do have some overlap: In Texas, where both have subsidiaries, and in their nationwide mortgage banking and credit card operations.
BankAmerica has 95,500 employees with 2,000 branches in 10 states including California, Oregon, Washington, Nevada, Arizona, New Mexico, Texas, Idaho, Alaska and Hawaii. It has $230 billion in assets.
NationsBank has 58,370 employees with 1,821 branches in the Carolinas, Virginia, Tennessee, Georgia, Maryland, Washington D.C., Connecticut and Texas. It has assets of $182 billion.
One stumbling block to a potential merger is where the combined banks would be headquartered, the Times said, citing a high-level BankAmerica source it did not name. Executives at BankAmerica have suggested compromising on Washington, D.C., for the headquarters, the source told the paper.
by CNB