Bidding War Expected for B of A Texas Branches(BankAmerica Corp.)

By Domis, Olaf de Senerpont | American Banker, March 6, 1998 | Go to article overview
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Bidding War Expected for B of A Texas Branches(BankAmerica Corp.)

Domis, Olaf de Senerpont, American Banker

BankAmerica Corp.'s plan to sell its 166-branch retail network in Texas is likely to spark spirited bidding by big banks active in the state.

"Everybody will be interested," said William Strunk, chairman of Strunk & Associates, a Houston consulting firm. "You name it."

San Francisco-based BankAmerica, unhappy with the returns on its Texas retail business, announced this week that it would seek to sell its Texas branches and their $4.4 billion of deposits.

The four largest bank companies in Texas- NationsBank Corp. of Charlotte, N.C., New York-based Chase Manhattan Corp., Banc One Corp. of Columbus, Ohio, and Norwest Corp., Minneapolis-would probably be bidders, analysts said. None of the banks would comment on the matter.

The network would probably fetch about $440 million, or a 10% deposit premium, observers said. BankAmerica received a deposit premium of approximately 10% for 68 rural branches it sold in Texas last June.

In an interview Thursday, BankAmerica chief financial officer Michael E. O'Neill said the company would sell the branches and deposits for cash only.

"Our expectation is that someone already in Texas will view this as an interesting add-on to their operations," Mr. O'Neill said. "There are plenty of interested parties."

The move to exit Texas follows a game plan the company laid out last year: to shed businesses that do not fit long-term strategy or that fail to meet profitability goals.

"We reluctantly concluded it was going to be ... a very long haul to generate acceptable returns on equity" in Texas, Mr. O'Neill said. "We've been working for years to try and turn the thing around, but decided it would not be possible."

The bank took a $112 million charge in the third quarter to cover its withdrawal from Chicago-area supermarkets. In October, it placed its mobile-home financing unit, BankAmerica Housing Services, on the block, and last May, the company sold its $1.8 billion-asset Hawaii savings bank.

"This is what they've been signaling," said R. Jay Tejera, an analyst with Dain Rauscher Inc. in Minneapolis. "This is a recognition of a couple of things: They have a lot of work to do, and No. 2, they want to concentrate on their dominant place in the West."

BankAmerica entered the Texas retail market in 1991, when it purchased some of the assets and liabilities of Village Green National Bank of Houston from the federal government. It followed with acquisitions of Commerce Federal Savings Association in San Antonio, Sunbelt Federal Savings in Dallas, and First Gibraltar Bank in Irving.

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