Magazine article American Banker

Holding Company Ranks Rise as Banks Shrink in Number

Magazine article American Banker

Holding Company Ranks Rise as Banks Shrink in Number

Article excerpt

Consolidation across states lines and largely successful efforts by many banks to get into new businesses seem to be increasing the number of banking holding companies - even as the number of banks in the nation continues to decline.

According to an American Banker survey of the top 100 U.S. banking companies, there were 1,283 bank holding companies as of March 31 - 40 more than at the end of 1995. There were only 828 on Dec. 31, 1990.

From yearend 1995 to March 31, the number of banks dropped by 103, to 9,838. At the end of 1990 there were 12,347.

Analysts said the steady increase in holding companies and the corresponding decline in banks can be attributed primarily to two factors: diversification and consolidation.

The analysts noted that as banks diversify beyond straight lending and deposit-taking and get into new businesses, such as leasing, they require a holding company structure. Acquiring a bank in another state, they added, often also requires a holding company structure.

"If you want to do anything else, you have to do it through a holding company," said Carol Berger, a bank analyst at Salomon Brothers Inc. "Most nonbank activities require a holding company structure."

Analysts said the large number of thrifts converting to banking charters probably has helped to boost the number of holding companies. They also noted that some banks have set up multiple layers of holding companies, in order to put individual banks acquired in other states under a single roof.

The American Banker survey also found a gap in size is emerging, and widening, between a handful of big bank holding companies and the 1,225 others with assets of less than $10 billion.

The growing gap amply illustrates that there is room in the market for big and small banks, but less and less room for midsize institutions, analysts said.

"People have been saying for years that midsize banks are the ones feeling the most pressure from the consolidation in the industry," observed Raphael Soifer, a banking analyst with Brown Brothers Harriman in New York. …

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