BANK MERGERS ARE back in fashion. After a hiatus of more than two years, the consolidation of US financial institutions, which started in earnest when the state banking laws were changed in 1994, has now resumed.
There are two chief drivers. First, a core group of banks have their eyes on constructing as national a retail franchise as possible. Ken Lewis, Bank of America's chief executive, alluded to that when he dubbed his firm's acquisition of FleetBoston last October a land grab, one which takes the combined bank closest to a national branch network. The new bank will have 9.8% of all bank deposits.
It can't buy any more. One of the few remaining regulatory limits on retail banking in the US is that no one institution can have more than 10% of the country's deposits if it comes via an acquisition. Lewis's bank is now out of the retail bank merger business.
Desperate search for growth Those still in the game have a pretty short wish list of banks that are worth buying to get to that limit because, explains a financial institutions group (FIG) investment banker, there are only a handful of states with the right mix of deposits and growth potential: "To have a national franchise you ought to have a presence in five states: New York, Illinois, California, Texas and Florida.