By Mark Trumbull, writer of The Christian Science Monitor
The Christian Science Monitor
THE bank-merger wave keeps rolling along.
This week it hit two financial linchpins of the Pacific Northwest: US Bancorp of Portland, Ore., and West One Bancorp of Boise, Idaho, which are joining to create a $30 billion regional giant, comparable to other "superregional" banks such as New England's Bank of Boston.
The bank-industry consolidation trend is no longer driven by dire circumstances, such as the severe real estate loan losses that many banks suffered in the last recession. The theme today is pleasing shareholders. They want an even better return, despite the industry's record earnings in the last two years.
Monday's deal is typical for today.
"Our shareholders deserve better," says US Bancorp chairman Gerry Cameron. (The company's stock price is little changed from 1991.)
Mr. Cameron argues that the merger will create a larger and more efficient bank in one of the nation's fastest-growing regions. The new US Bancorp bank would be dominant in Oregon and Idaho and stronger than before in Seattle, the region's biggest market.
US Bancorp currently faces tough competition in this city, lagging behind BankAmerica's Seafirst Bank, Key Bank of Washington, and First Interstate Bank. The merger would make US Bancorp No. 3 in Seattle, passing First Interstate.
"This clearly solidifies our position as the premier Northwest banking institution," Cameron says.
Analysts say more such mergers can be expected this year.
For many bank chiefs, this is a good time to sell the company at a premium to a bank that is hungry to expand, says Warren Heller, research director at Veribanc in Wakefield, Mass.
For buyers, the motive is often to expand geographically into a superregional or even a nationwide bank. Also, well-managed banks can reap profits by buying their less-efficient peers and reforming them.
"It's the low average-cost banks that are winning," says Alan Hess, a finance professor at the University of Washington in Seattle.
Leading the acquisition charge over the past few years have been NationsBank in the Southeast, Banc One Corporation in the Midwest, and Fleet Financial Group in New England, Mr. Heller says.
Some other banks, such as Wells Fargo & Co., have been trying to please shareholders by buying back their own stock. This boosts the value of remaining shares. …