Two years ago Elliott Averett, former chairman of the Bank of New York, said in an interview he would like to merge the bank with the United States Trust Company of New York.
Today, J. Carter Bacot, the new chairman, says a merger with US Trust does not interest him. ''We're moving ahead,'' he says, ''and they are kind of standing still.'' Instead, he says, if the bank were to seek any mergers, it's more likely it would seek a marriage with a smaller regional bank in New Jersey or Connecticut.
''Whatever mergers occur,'' Mr. Bacot said in an interview, ''must result in our developing a stronger position as a nationwide bank holding company.'' And the way to survive in a banking environment that is already extremely competitive, he says, is ''to be aggressive.''
Consumers got a taste of what he meant recently when the bank was among the first big New York State banks to announce it would lower its interest rates on credit card balances from 19.8 percent to 18 percent. The cuts, which included lowering interest charges in six categories, said Peter Earle, a vice-president and spokesman, ''reflect an aggressive consumer loan policy and a belief that interest rates in general will trend lower.'' This move, the Value Line Survey hypothesized, ''could result in a big increase in credit card and auto loans'' if the economic recovery is consumer-led.
At the same time the bank is moving to attract consumers, it is also moving aggressively in the corporate banking world. James H. Wooden, vice-president of Merrill Lynch & Co., says the bank's strategy has been to develop new business ''through specialization in certain market niches that exhibited superior growth potential, or in which the company felt it had developed or could develop a significant level of expertise.''
Mr. Bacot adds: ''In areas that we would like to be, we can be very aggressive - price-wise.'' These areas include making loans to the cable television, public utility, and publishing businesses. ''I like construction lending as well,'' he says. In addition, the bank has been remarkably successful in expanding its fee income from the trust business. In 1981, it was the third-largest bank in trust revenue.
Even though Mr. Bacot is bringing some new life to the bank, it remains a conservative institution. For example, when other large banks were lending to the Penn Square Bank in Oklahoma City, the Bank of New York turned down Penn Square twice. ''They were making loans on the basis of oil at $100 per barrel,'' Mr. Bacot comments. ''We would never loan on the basis they did.''
The bank likewise turned down the opportunity to make a loan to the Drysdale Securities Corporation, which later defaulted on some large loans to Chase Manhattan Bank and Continental Illinois bank.
The bank was not so fortunate internationally, where its total average loans increased 24 percent last year, to $1.3 billion. A major portion of this increase came from the United Kingdom and Western Europe.
According to a recent prospectus, however, the bank has $243 million in loans outstanding to Mexico, $224 million to Brazil, and $115 million to Yugoslavia. Together these loans represent 5.8 percent of its total loans. All these loans have been renegotiated and the countries are only paying interest, not principal. Even though the countries are clearly in trouble, the bank, like most others, is carrying the loans on its books as ''full performing loans.'' (Loans to foreign corporate borrowers, however, are considered differently. The bank, for example, has written off 60 percent of the loans it made to Grupo de Alfa, a huge Mexican corporation. This loan would be less than $9.6 million.)
Because of the trouble with some of the international loans, Theresa Brophy of Value Line says, ''There may be an increase in foreign loan charge-offs during the year ahead.'' She figures the bank will increase its loan-loss reserves, especially since its loss reserve in 1982 of 0.86 percent of the bank's total loans falls short of the banking norm of 1 percent of total loans.
A spokesman for the bank notes that the loan-loss reserve has risen for the past two years and says that this year the bank ''plans to increase it again.'' But he adds, ''Historically, our experience does not call for it, since our loan losses have been so low.''
Even though it is stuck with the loans to the ''superdebtors,'' the bank is optimistic that the problems will be worked out. ''With the decrease in oil prices, interest rates have some more room to come down,'' says Deno D. Papageorge, comptroller of the bank. This should benefit countries like Brazil, and will eventually help Mexico, even though it is losing revenue as the price of oil falls. ''The problem is, the price of oil is falling faster than interest rates,'' Mr. Papageorge says, adding, ''The Mexicans must tighten their belts.''
The same is true with Yugoslavia, Mr. Bacot says. It must cut down on its expenditures, particularly on the consumer side. ''If Tito (the former leader of Yugoslavia) were alive, there would be no problem,'' says Mr. Bacot. ''Today there is no central power base.''
Domestically, Bacot is looking for a ''tough period ahead,'' as the bank positions itself to get through the deregulation of the financial markets. He says he expects to survive this era through ''an aggressive'' policy of marketing and pricing.
Such a policy may imply declining profit margins at the bank, which has traditionally been among the best performers. Last year the bank posted a return on its assets of 0.6 percent and a return on its equity of over 15 percent.
Mr. Wooden of Merrill Lynch recommended the stock late last year, since the shares offered an above-average yield and were selling significantly below book value. In addition, he said, the company was well positioned to increase its market share among larger corporate customers and had strong growth potential in trust revenues. Since Mr. Wooden's recommendation, the stock has risen 10 percent. Nonetheless, at $54 a share it remains below the book value of $67.59 per share.
Ms. Brophy of Value Line is slightly less optimistic, noting the company recently sold a $100 million adjustable-rate preferred stock. ''The company will have to overcome the negative effect on its earnings per share of the dividends'' on the preferred issue, she says. Both analysts are estimating the bank will earn $8.90 a share in 1983, compared with $8.48 a share last year.