Magazine article American Banker

A Time for Consolidation for Top 300 Banks

Magazine article American Banker

A Time for Consolidation for Top 300 Banks

Article excerpt

Consolidation continues to radically reshape the distribution of bank assets and deposits, as well as efficiency ratios and profitability measures, according to American Banker's latest survey of the top 300 commercial banks.

During the first half, 52 banks in the top 300 acquired 132 depository institutions. Seventy-five were affiliates of their acquirers; 57 were unaffiliated.

Banks' weakening position as financial intermediaries was underscored by the finding that although the top 300 banks acquired $87.3 billion in deposits through acquisitions, the net increase was only $75.4 billion, because funds continued to flee to higher- yielding investments. Deposits at the top 300 banks climbed only 4%, to just short of $2 trillion, over the last six months, but assets rose 6.9%, to slightly over $3 trillion.

"Core deposits are going down," said Lawrence Cohn, a banking analyst with PaineWebber Inc. "Customers are being tempted out of banks, because banks are sacrificing their customer bases in order to maintain their margins."

As testimony to the streamlining taking place throughout the industry, the number of commercial banks fell 5% during the first half, to 10,168. Since 1988, that number is down by more than 24%.

Employment in the banking industry is also declining. At mid- year, commercial banks' staffing totaled 1,479,385, down 16,292, or 1%, since yearend, after increases in 1993 and 1994.

The survey also found more concentration of

banking business at the largest banks.

At the end of June, the top 300 held 68.6% of the $2.9 trillion of total bank deposits, up from 66.8% at yearend and 62.4% seven years ago.

The 300 also held 73.5% of total banking assets of $4.17 trillion, up from 67.8% five years ago.

"The trend toward consolidation will continue," predicted Raphael Soifer, an analyst with Brown Brothers Harriman. …

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