Banking's Merger Mania

July 24, 1991

Baltimore suddenly finds itself the northernmost outpost of NationsBank, the first mega-regional bank in the country. The impact on the local banking scene will be minor at first, but the long-term implications are large indeed. With banking merger mania taking hold, coast-to-coast, it is predictable that super-regionals will be eyeing the Baltimore market and looking for acquisition targets.

The newly merged combination of NCNB Corp. of Charlotte, N.C., and C&S/Sovran of Richmond and Atlanta is described as "a bank with a Southern accent and a truly national reach." The third largest bank holding company in the nation (after Citibank and the new Chemical-Manufacturers Hanover combination), it stretches from Baltimore to Key West and then westward to El Paso. Market share puts it first in North Carolina, South Carolina, Texas and Georgia, second in Florida and third in Tennessee and Maryland, where NCNB has seven branches in Baltimore and C&S/Sovran has 85 statewide, mostly in the Washington suburbs.

With the near-collapse of MNC Financial, Baltimore lost its only potential super-regional bank. Headquarters for these powerhouses will be in places like Charlotte, Pittsburgh, Philadelphia and Columbus -- not here. This is an undoubted loss in terms of civic leadership, national prestige and local resources. But if the Baltimore region thrives, the funds will flow to finance it. Money is fungible.

NationsBank's arrival on the scene, once it gets over the trauma of its Sovran merger, could be a challenge to such volume-oriented local banks as Maryland National, First National and Signet. NCNB is inherently expansionist, and will want to build on its Baltimore beachhead. Other regional banks that might want to move in here include CoreStates in Philadelphia, Mellon and PNC Financial in Pittsburgh and Banc One in Columbus.

All this is part of a trend toward consolidation brought on by bad debt problems, foreign competition and a general consensus that the nation has too many (12,000) banks. Congress is now working on banking reform legislation designed to shore up an overwhelmed bank deposit insurance system and permit big banks, especially, to go into interstate branching. Business Week magazine has predicted that the number of U.S. bank holding companies will shrink by mid-decade from 125 at present to 7 to 15 large bank groups and perhaps a dozen or two smaller ones. This emphasis on bigness, however, will leave a niche for smaller banks offering quality, specialties and personal service.

Since it is Baltimore's destiny to remain in banking's bush leagues, the business community here will have to be doubly agile and aggressive to assure the region's continuing prosperity.

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