As mergers continue to whittle down the number banks in the United States, fundamental shifts are occurring in the industry.
Some branch offices are closing in many communities as banks consolidate. Regional banks are becoming more national in scope. The largest banks are winning a larger share of total deposits. And, even as cities and towns become increasingly dominated by a few big banks, thousands of small banks are retaining a role by expanding services and honing specialties.
The merger trend was underscored by the announcement of the $8.7 billion takeover of Boatmen's Bankshares Inc. in St. Louis by NationsBank Corp. of Charlotte, N.C., earlier this month.
And within the past few days, Chase Manhattan Bank, located here, has begun a new local advertising campaign, as it is now consolidating its offices with Chemical Bank, with whom it has merged. Looking down the financial roadway, more mergers can be expected in the years ahead, as banks jostle to ensure their institutions are survivors in a rapidly changing industry.
"Why are banks merging?" asks banking analyst George Salem, of investment house Gerard Klauer Mattison & Co. in New York. It's the quest for economies of scale, he argues.
But whether the mergers are leading to economies of scale - the traditional antitrust justification for intra-industry mergers - remains open to debate.
"There is no evidence that the mergers and consolidations are leading to major new gains in efficiencies," says banking expert Gary Gorton, a professor of finance at the Wharton School, of the University of Pennsylvania.
What many bank experts do agree on is that additional mergers can be expected, in large part reflecting the zeal of top banking officials, rather than demands from shareholders.
Indeed, in the case of the NationsBank-Boatmen's linkup, the merger announcement prompted an initial drop in share prices for NationsBank, which would buy each Boatmen's share at a premium of about 41 percent.
The banking industry is driven by strong personalities, says Paul Nadler, a professor of finance at Rutgers' Graduate School of Management, in New Brunswick, N.J.
"A bank is typically the length and shadow of one person," he says. In the case of the NationsBank, chief executive Hugh McColl has been "very smart," Professor Nadler says. Although the Boatmen's deal has been considered dubious by some shareholders, through the takeover Mr. McColl "gains much of the US Midwest" for his banking operations, says Nadler.
Fleet Bank of Providence, R.I., has followed a similar pattern. Fleet's buyouts have positioned it as the largest retail player in the Northeast, bypassing the long-dominant Bank of Boston.
Whatever the ultimate impact of the mergers, a number of key changes have already occurred, experts say:
Regional Diversification. Twenty years ago, most of the top 10 banks in the US (in total assets) were the so-called money-center banks of New York City. The main exception was Bank of America in San Francisco. Today, of the 10 largest bank holding companies in the US, only four are based in New York: Chase Manhattan, Citicorp, J.P. Morgan, and Bankers Trust. And of those four, J.P. Morgan and Bankers Trust "are not really even banks, in the traditional sense" of retail service to individuals, one analyst says. "Both are really investment banks."
Six of the top 10 bank-holding companies are now regional players: two in North Carolina (NationsBank and First Union), two in California (BankAmerica and Wells Fargo), one in Illinois (First Chicago), and one in Ohio (Banc One).
"There's been a tremendous change of leadership within banking," Mr. Salem says.
Concentration of deposits. Nationally, the percentage of assets held by the largest banks has increased, at the expense of mid-size institutions. According to a study published recently by the Federal Reserve Bank of New York, large banks having assets of $5 billion or more held 53 percent of national bank deposits in 1989. By 1994, following a spate of mergers, that percentage had increased to 60 percent.
Shutdowns and layoffs. The mergers have led to the closing of large numbers of branch offices across the US. Many bank employees have been let go, although many institutions are downsizing through attrition.
Innovative Services. Some merged banks are adding new layers of services, such as expanded hours, although the quality of the services has yet to be fully measured, Professor Gorton says. Meanwhile, the big-bank mergers have prompted an increase in retail services by smaller, niche-oriented banks.