Bank of New York's Bacot: Ready for Another Merger
Gullo, Karen, American Banker
IN FRIGHTING SHAPE: With the hostile Irving merger behind him, Bank of New York's J. Carter Bacot is gazing both near and far.
NEW YORK -- With one big acquistion under his belt, J. Carter Bacot sounds hungry for more.
"We'd like to do another merger," acknowledges Mr. Bacot, chairman of Bank of New York Co., which now has $39 billion in assets. "We know how to do it and do it well."
Indeed, Mr. Bacot shook up the New York banking community four years ago by acquiring Irving Bank Corp. in what was billed as the first hostile takeover in the banking industry. Since then, he has earned the respect of analysts and fellow bankers by making the merger work.
In part he has done this by elimating $200 million of annual expenses, instilling in his troops an impressive sense of austerity. Offices are spartan, frills have been cut. It's almost at the point that his people won't part with a paper clip.
Now Mr. Bacot feels that Bank of New York is in fighting shape ready to do another deal. The stock, market seems to agree, having pushed Bank of New York's stock price up 36, to about $42, since January 1.
In addition, first-quarter profits hit $80 million, compared with a loss of $63 million in last year's first period.
Mr. Bacot won't mention any potential merger targets, and claims he's not in hurry. But he says that ideally he would like to acquire an institution with a solid consumer franchise and more than $10 billion in assets.
"The best values lie right around here," he says, relaxing in his small but well-appionted office at the bank's Wall Street headquarters. "If there are opportunities in our bbackyard, we're going to look at them."
Among the most talked about possibilities: Shawmut National Corp., Hartford, Conn., with $22.8 billion in assets, UJB Financial Corp., Princeton, N.J., with $13 billion in assets, or even the smaller BayBanks Inc., Boston, with $9.5 billion in assets.
Mr. Bacot isn't confining his gaze to the Northeast. He has told analysts that he is interested in looking for acquistion in the midwest. A few months ago anaylsts were speculating that one Bacot target might be First Chicago Corp., the $49 million-asset institution with a large consumer business.
They remember that Mr. Bacot wasn't stopped last time by the fact that Bnak of New York was smaller han its prey, Irving. Still, a First Chicago merger is cinsidered a long shot.
Judah S. Kraushaar, an anaylst at Merrill Lynch & Co., believes a Midwestern acquistion may be a long-term, rather than a short-term, goal for Bank of New York. Said Mr. Kraushaar: "They recognise that there are unusual opportunities closer to home."
One thing Mr. Bacot does not want is to see Bank of New York itself get ACQUIRED.
There has long been talk that his instittion might join forces with another big New York City player, such as Chase Manhattan Corp. But Mr. Bacot indicates that no such combination will occur while he's around. "We want to stay independent," he says flatly.
Mr. Bacot, 59, has a direct, take-no-prisoners approach to business. That attitud helps explain what made the Irving-Bank of New York merger work so well.
True, almost 4,000 people lost their jobs. But Mr. Bacot feels that heavy cuts were necessary to preserve the health of the institution and the jobs of its other 13,226 employees. Headcount reduction, especially at the management level, should be done quickly.
"People get entrenched, and then they're fighting with each other rather than the competition," Mr. Bacot says.
Shipshape Performance Ratios
The gruff, almost taciturn Mr. Bacot is revered among institutional investors because he runs such a tight ship. Bruce Herring, an analyst at Fidelity Investments, Bank of New York's largest stockholder, estimates that the bank's expense ratio in the first quarter was 53% while most banks are in the high 50s or 60s. …