Magazine article American Banker

Don't Bank on Lending, Mellon Chief Advises at BAI Finance Conference

Magazine article American Banker

Don't Bank on Lending, Mellon Chief Advises at BAI Finance Conference

Article excerpt

With competition for commercial loans continuing to increase, bankers would be wise to diversify their businesses to be less dependent on lending, Mellon Bank Corp. chairman Frank V. Cahouet said.

Speaking this week at a Bank Administration Institute conference, Mr. Cahouet also said his company will continue to expand its commercial and consumer fee businesses through acquisitions.

The executive, who has overseen Pittsburgh-based Mellon's transformation from a conventional lender to a specialist in commercial trust and personal asset management, predicted that most companies in need of financing will look outside the banking industry.

"Our view is, in the next decade, investment-grade businesses worldwide will not be borrowing from their banks," Mr. Cahouet said.

He singled out Merrill Lynch & Co. as a nonbanking company that is competing for business loans with $42.6 billion-asset Mellon.

"They're competing for middle market and large corporate business," Mr. Cahouet said. "That's fine. It's a free market, but that would not have happened 20 years ago."

Mellon saw the need to diversify several years ago, Mr. Cahouet said. That led it to buy asset management companies such as the Boston Co. in 1993 and Dreyfus Corp. a year later. Last year it bought U.S. Leasing and First United Leasing.

Mr. Cahouet said the key to surviving as a banking company today is to provide a range of services, rather than focusing on a single business, and being less dependent on economic and business cycles. …

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