MNC's Future: Not Bad for Baltimore

July 20, 1992

NationsBank's $200 million investment in MNC Financial Inc., in exchange for a 16 percent ownership stake, has shaken up the local corporate community. If giant NationsBank -- the country's fourth largest, with $111 billion in assets -- exercises its option during the next five years and acquires MNC, the parent of Maryland National and by far the state's dominant banking company, Baltimore's three largest banks would be owned by out-of-state companies. Will this development be detrimental to our community?

Judging from the experience of two other major banking companies that are no longer locally owned, probably not. First Maryland, which is owned by Allied Irish Banks, and Signet Bank of Maryland, formerly Union Trust Company of Maryland, are still vigorous lenders in this market and maintain high civic and charitable profiles.

It can be argued that MNC Financial was ripe for takeover as it struggled under the weigh of its poorly performing real estate portfolio. For years, MNC's management followed a strategic plan aimed at turning the company into a strong regional bank invulnerable to takeover. That concept failed when the bottom dropped out of the Baltimore-Washington real estate market two years ago. MNC found itself saddled with hundreds of millions of dollars in bad real estate loans.

Since then, the state's dominant bank has steadily been rebuilding itself. MNC has posted profits for the last two quarters. It shed its very valuable credit card subsidiary, MBNA, and its consumer lending subsidiary. MNC wrote off millions of dollars in bad loans and shrank its assets down to $16 billion, dropping from the 28th largest bank in the nation to No. 47.

With NationsBank's investment, MNC's future is more secure. The $200 million infusion will bolster the company's balance sheet and allow it to make more and larger loans. If MNC is acquired, its 8,000 employees are likely to keep their jobs because NationsBank will need them to run the bank. For most Maryland National depositors and borrowers, such an ownership change should have little impact.

The company's role as a corporate citizen will be different, though. In the past, MNC Financial has been a generous donor to a wide variety of local charities and an enthusiastic participant in the United Way. Whether it continues along that admirable path could depend on the type of senior managers NationsBank ultimately appoints and the civic and charitable policies developed in Charlotte, not in Baltimore.

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