Big deals: what do Indiana bank watchers think of the megamergers? More to come?

• Author: Beck, Bill

Bank megamergers have escalated in recent months, creating mammoth bank holding companies and promising to continue blurring the lines between banks, thrift institutions, brokerage houses and insurance companies.

The megamergers are of two distinct varieties: Those creating true national financial-services companies and those that establish super-regional banks with dominant market share in certain areas of the country.

This spring's announcement of a merger between Citicorp and the Traveler's Group is in the former category, as is the merger between Charlotte, North Carolina-based NationsBank and Bank of America in San Francisco. In the latter category are the upcoming acquisition of First Chicago-NBD by Banc One Corp. of Columbus, Ohio, and the planned merger of Minneapolis-based Norwest Corp. and Wells Fargo & Co. of San Francisco.

The creation of superregional banks through the Banc One-First Chicago NBD deal and the Norwest-Wells Fargo merger will have the most immediate implications for business in Indiana. The $26 billion Banc One merger joins the two largest banks in Indiana. Between them, the two banks have $18.5 billion in assets and control 46 percent of bank deposits in the Indianapolis metropolitan area.

Norwest, while achieving most of its dominant market share in Minnesota and Wisconsin, in recent years has made strong inroads into Fort Wayne and surrounding parts of northeast Indiana.

In the long term, however, the creation of true national financial-services companies like CitiGroup (the proposed name for the Citicorp-Travelers merger) may have more lasting implications for Indiana's banking landscape. As national banks merge with insurance companies and brokerage firms, they make inroads into the regulatory restrictions that have separated commercial and retail banking from other financial services since the 1920s and 1930s. And as national and super-regional banks move into areas that were traditionally the province of brokerage houses and insurance companies, they inevitably open the door for insurance companies and brokerage houses to get into the deposit and loan fields that were traditionally reserved for the commercial and consumer bankers.

The smoke hasn't yet cleared from the latest round of mergers, but bankers and analysts in Indiana say the 20-year-old process of mergers and consolidations in the financialservices industry is no longer surprising, although it may well be entering a new and accelerated phase.

"TOO MANY BANKS"

Wall Street veteran John Reed, a partner in David A. Noyes & Co.'s Reed Reinhardt & Associates, has been analyzing bank mergers in the Midwest since arriving in Indianapolis nearly a decade and a half ago. "We've had consolidations going on here for the last couple of decades," he says.

Reed identifies a couple of fundamental reasons driving the mergers in the banking industry here and nationwide. First and foremost, he says, there are still "too many banks in this country." Most other First World countries have two or three big banks. Canada, our neighbor to the north, has a half-dozen national banks. Even with all of the recent merger activity, the U.S. still has more than 9,000 banks.

...