Financial Services to Consolidate in 1990s

Article excerpt

A consolidation will take place within the financial services market in Oklahoma during the 1990s, with new laws prompting acquisitions and mergers in the banking industry and economic conditions playing a role in thrift mergers.

"We are looking at a consolidation from 53 savings and loans today to perhaps 25 institutions at 250 locations," said Michael Toalson, president of the Oklahoma League of Savings Institutions. "The trend is not for more bricks and mortar. As a community grows, we expect branching to trace it, but not with the type of growth in branching as we have had in the past."

Currently, there are 195 branch locations of Oklahoma savings and loan associations.

More mergers in the banking industry are expected to take place during the next 12 years, according to Wayne Osborn, Oklahoma bank commissioner.

"I think we will see a tremendous number of mergers," he said. "As far as the general public, merged larger banks will be able to serve them better."

In many cases, mergers will be formed through the unification of small banks packaging themselves into single branching systems, said Robert Harris, executive vice president of the Oklahoma Bankers Associaton.

"Our (OBA) strategic plan assumes we will have statewide branch banking in Oklahoma before 1992," Harris said. "It will substantially reduce the number of bank charters and increase the number of banking offices."

Bank charters will stabilize at a number between 250 and 300, Harris said, reduced from 489 banks today.

The diminish of bank charters will mainly occur through acquisition and mergers, Harris said. By the second quarter of 1988, bank failures will no longer be a major concern.

Smaller institutions will find it increasingly difficult to operate in a deregulated environment, Harris said.

"They can't afford human or physical resources necessary to compete with large organizations," he said. "By merging a number of these together and creating larger institutions, these resources will become affordable."

Bank powers will be expanded, allowing them to sell securities, insurance and broker real estate, officials said. Savings and loan associations will look like a bank and market the same services as a bank.

"By the year 2000, it will probably be difficult to tell the difference between all financial institutions," Osborn said.

The credit union industry will probably remain a viable consumer organization as it is today, according to Marvin Cottom, president of Weokie Credit Union.

"As other institutions get bigger and lean more toward commercial lending, they are driving the consumer and working class to the credit union," Cottom said. "Survival will be enhanced by the larger size of other institutions."

There will probably be additional mergers in the credit union industry, officials said, but primarily as a result of economic factors affecting the membership field they serve.

More credit unions may take advantage of the Credit Union Service Organization, which is a vehicle used for brokering real estate and selling insurance.

"We currently have the power to service all the members' financial needs," Cottom said.

Savings and loan associations will be referred to as banks, noted Toalson, but they will retain their traditional role as housing lenders.

"While we may look like a bank, financing housing will be a primary function well into the 1990s," he said. "We will see a reduction in housing financing within the asset mix, but will continue to be primary financiers of housing needs.

"I am personally convinced that we (savings and loans) will offer more services than we do today, specifically in consumer loans and commercial loans, and we will continue to be the primary real estate lenders. …