Magazine article American Banker

First Union's Chairman Wonders: How Big Is Too Big for His Bank?

Magazine article American Banker

First Union's Chairman Wonders: How Big Is Too Big for His Bank?

Article excerpt

ATLANTA - First Union Corp. chairman Edward E. Crutchfield Jr., one of banking's preeminent empire builders, is publicly musing about how much larger his company should grow.

In an unusually frank letter to shareholders, Mr. Crutchfield wrote that First Union is "weighing the question of the optimal size for a bank to operate profitably in the '90s and beyond.

"There is a question whether a $100 billion to $200 billion bank can operate as efficiently as a $68 billion bank," he wrote in the company's annual report. "We must weigh whether the problems of |bigness' at some point might overwhelm the advantage of size."

Eighth-Largest Bank

The report and the company's proxy will be sent to shareholders next week, the company said.

First Union, based in Charlotte, N.C., will have $71.6 billion of assets and will be the nations eighth-largest bank with the completion of pending acquisitions. At the end of 1985, when it began its interstate expansion, the company had $16.6 billion of assets.

Mr. Crutchfield could not be reached for comment. But company sources said that First Manhattan Consulting Group last year submitted a report on the "optimal size" issue to First Union's senior management.

Mr. Crutchfield's "letter from the chairman" is dated Feb. 18, about a week before his company announced the acquisition of First American Metro Corp.

The company has $4.6 billion of assets in Washington, D.C., Virginia, and Maryland.

|Risks of Bigness'

First Union's major competitor, Charlotte-based Nations-Bank Corp., has $118 billion in assets and is the only southeastern bank in the S I 00 billion-plus range that Mr. Crutchfield questioned.

The executive's three-page letter expanded on the issue in a section headed "Controlling the Risks of Bigness.."

When First Union began its interstate expansion in 1986, Mr. …

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