Md. bank official blocks NationsBank

BANKING & FINANCE

April 08, 1994|By David Conn | David Conn,Sun Staff Writer

NationsBank Corp.'s steady march toward interstate branching -- ahead of Congress' efforts to pass a national branching law -- was stopped in its tracks last month by Maryland Bank Commissioner Margie Muller.

The Charlotte-based company, now Maryland's largest banking company, had found a way last fall to establish a subsidiary bank headquartered in one state that ran branches in another state. The authority was based on a 1959 revision to a 19th-century law that allows banking companies to move their headquarters up to 30 miles away, even across state lines.

In February the Office of the Comptroller of the Currency approved NationsBank's application to move its American Security Bank into Maryland and merge it into Maryland National Bank.

Still pending is the company's request to finalize the consolidation of its Washington and Maryland banks into one Maryland-headquartered bank called NationsBank of Maryland.

Once that was done, according to a new application to the OCC last month, NationsBank planned to take the next step: It asked for permission to move its Maryland bank headquarters into Virginia, where it would merge ultimately into NationsBank of Virginia.

That's where the march stopped. Late last month, "in light of Commissioner Muller's concerns, we withdrew" the latest application, said NationsBank spokeswoman Martha Larsh.

For Ms. Muller, the issue was simple. Her office "concluded that Maryland law does not permit an out-of-state banking institution to have an office in Maryland to conduct a general banking business," she said this week. In other words, until Congress acted, NationsBank would have to maintain a subsidiary bank headquartered in Maryland if it wanted to operate branches in the state.

Congress is close to approving a national branching law that would take effect a year after enactment.

Aside from representing "a legal end-around the law," NationsBank's maneuver would leave the company with "so many branches operating over such a broad territory that it would be extremely difficult for any state to have any kind of authority over what's being done in that state," Ms. Muller said.

Signet credit gains

Richmond-based Signet Banking Corp., for the first time, has chosen to release the financial results for its successful credit card business, an operation many analysts have come to view as the tail wagging the dog.

That suspicion was largely borne out last week when the company, parent of Signet Bank/Maryland, among others, reported that its credit card operation generated a $113 million profit in 1993, up from $17 million in 1992.

That means that credit card profits represented 65 percent of the total $174.4 million in 1993 profits, up from a mere 15.6 percent of 1992 profits.

The "credit card machine is really what's been driving their dramatic turnaround in profitability," said David West, an analyst at Richmond-based Davenport & Co.

Signet hopes that reporting its credit card numbers -- and the concurrent decision to create a separate subsidiary for the business -- will cause the stock market to give a higher valuation to the whole company. So far so good: Signet's stock jumped to more than $42 from $38 a share in the wake of the announcement.

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