Big Regional Banks Strengthen Positions with Small Mergers
Wells, Rob, THE JOURNAL RECORD
NEW YORK _ It's been months since the banking industry has seen a mega-merger like the pairing of California giants BankAmerica Corp. and Security Pacific Corp.
But the absence of huge deals doesn't mean a slowdown in bank mergers. On Tuesday, for example, Chemical Banking Corp.'s Texas affiliate, Texas Commerce Bankshares, agreed to buy Ameritrust Texas Corp. for $130 million.
Also Tuesday, ABN-Amro Holding NV agreed to acquire Cragin Financial Corp. of Illinois, a $2.8 billion savings bank, in a stock swap valued at $500 million.
"While we've seen some slowing in the larger combinations, we've seen an ongoing backing and filling process," said Frank Barkocy, senior vice president at Advest Inc., a regional brokerage firm.
Large regional banks are strengthening their positions and market share through small mergers that don't grab the headlines.
Two banks that have skillfully used this strategy are Norwest Corp. of Minneapolis and KeyCorp of Albany, N.Y.
Between 1990 and February 1993, Norwest has grown aggressively, with 23 acquisitions of banking, insurance and finance companies. The deals, some of which are pending, added $18.5 billion in assets to Norwest, the nation's 15th largest banking company.
Norwest has managed its rapid growth while maintaining a strong balance sheet: its Tier 1 capital to assets ratio, a measure of a bank's ability to absorb sudden losses, is 10.4 percent, far exceeding the 4 percent minimum. Management predicts 13 percent annual growth in per-share earnings.
One of Wall Street's most critical bank analysts, George Salem of Prudential Securities Inc., had glowing praise for Norwest in a research report issued last week.
"It is among a handful of (bank holding companies) that are ahead in the race to become truly national," Salem said.
Richard Kovacevich, Norwest's president and chief executive officer, said in a recent interview the company's strength comes from the diversity of its businesses: banking, insurance, mortgages and consumer finance.
"Analysts have suggested, and we tend to agree, that we are somewhat of a prototype for what I think banking is going to be," Kovacevich said.
"If you really look at revenues in this industry, they are not (from) large corporations. The revenues are (from) the consumer business, the small business . . . we're simply reflecting our communities."
Norwest's earnings also reflect its diversity: 55 percent comes from its community banking businesses; 30 percent from its consumer finance company, Norwest Financial; 10 percent from a mortgage company, Norwest Mortgage; and 5 percent from corporate banking. …