Bank Mergers: What The Latest Ones May Mean To You
The result of the latest bank mergers, in the opinion of one expert, John McCune of SNL Financial, an independent research firm in Charlottesville, VA, is that in the near future "...we'll have three big banks - and everybody else."
Those three banks, in order of size, are Citigroup, with $1.9 trillion in assets; J.P.Morgan Chase & Co/Bank One Corp with $1.1 trillion; and Bank of America/FleetBoston, which will have just under $1 trillion. (Just as a point of reference, a trillion has 12 zeros in it.)
Many other countries have just a few banks. Canada, for instance, has five very large banks that control 90% of the Canadian market. The Riegle-Neal Interstate Banking and Branching Efficiency Act passed by Congress years ago prohibits any single bank control over more than 10% of the deposits in the United States. Proponents of the megabanks indicate that big banks can compete better internationally, and they can offer a wider variety of financial services
Some of the 'everybody else' referred to above are some fairly large banks. Wells Fargo & Co of San Francisco; Wachovia Corp. of Winston-Salem, N.C.; PNC Financial Services Group in Pittsburgh; SunTrust Banks Inc. of Atlanta; U.S. Bancorp of Minneapolis; and Washington Mutual Inc. of Seattle are all now considered to be under pressure to initiate mergers of their own or risk being absorbed by one of the three bigger financial institutions.
Industry watchers offer detailed observations about the mergers of megabanks. Gerri Willis of CNN/Money points out that merging banks will sometimes close branches, resulting in service disruptions. The combination and merging of systems can cause glitches in processing. Fees may increase. A recent study by the U.S. Public Interest Research Group shows that larger banks charge higher fees than smaller ones. And of course, there is almost always a cut in personnel. The J.P. Morgan Chase/Bank One is expected to cost more than 10,000 jobs. One spokesperson said that most job eliminations would be by attrition.
The positive side of the megamergers is that they generate marketing possibilities for community banks. Kenneth A. Guenther, president and chief executive of the Independent Community Bankers of America said, "Mergers like this always create opportunities for smaller institutions that provide more hands-on service. This isn't a negative for community banks."
Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 11, 1/04
Privacy Policy Disclaimer Recommend This Site ! Contact Us
BankersOnline is a free service made possible by the generous support of our advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all banking professionals. Support our advertisers and sponsors by clicking through to learn more about their products and services.
|
Print Friendly!
Email This Article!
Discuss NOW!