CHARLOTTE, N.C. -- NationsBank Corp. is picking its fights with
Wall Street more carefully as it looks to boost profit from
Three years after it broke into capital markets, the fourth-
largest U.S. bank is pulling back from less-profitable areas, such
arranging loans and underwriting bonds for government agencies and
Instead, it's placing its bets on other, more lucrative capital
markets businesses, such as arranging loans and selling bonds for
junk-rated companies, and pondering a move to help private companies
sell shares to the public, an activity historically controlled by
Wall Street investment banks.
"We're committed to this business," said Thomas White, head of
investment grade, high-yield and emerging market corporate finance
NationsBanc Capital Markets. "We don't intend to compete with Morgan
Stanley and Merrill Lynch in every area. We'll compete where we can
Charlotte-based NationsBank, best known for its sprawling 16-state
retail banking empire including Oklahoma, built its capital markets
business from scratch in 1994, joining other U.S. banks taking on
Wall Street firms. Banks like capital markets businesses because
they generate fees and take advantage of the their relationships
already have with small and mid-sized companies.
Many big commercial banks have poked at the decades-old legal
walls restricting their involvement in investment banking. More and
more are considering buying investment banks after Bankers Trust New
York Corp. agreed last month to acquire Alex. Brown & Sons. If
approved by regulators, that combination would signal a new era for
investment and commercial banking under one roof.
"This acquisition focused us more seriously on our strategies,"
said White, who replaced John Griff as head of investment grade in
NationsBank would rather buy than build its equities underwriting
business, White said. He declined to name prospective takeover
"We're looking very aggressively," White said, stopping short of
saying how soon the company would make a purchase. "We've always
been disciplined and opportunistic in acquiring banks, and we'll
the same approach getting into the equities business."
One incentive to move into equity underwriting is the concern that
the company could lose the other business it does with corporate
customers if it can't help them when they decide to go public.
NationsBank's move to cut back parts of its capital markets
business reflects the company's strategy of setting goals that
every business pull its own weight, or face sale.
The bank is reducing its lower-margin businesses, such as
arranging sales of municipal, government and corporate bonds. The
bank recently said it's considering selling its primary dealer
business, which trades securities issued by the U.S. Treasury and
other government agencies.
The bank, which declined to disclose profits for individual
capital markets businesses, said its global finance division
net income of $186 million on $597 million in revenue, and a 19
percent return on equity. …