Fed OKs creation of biggest U.S. bank BankAmerica, NationsBank plan $57.5 billion merger

Banking

August 18, 1998|By BLOOMBERG NEWS

WASHINGTON -- The $57.7 billion merger of BankAmerica Corp. and NationsBank Corp. won approval yesterday from the Federal Reserve, clearing the way for them to join forces and become the largest U.S. banking operation.

The banks agreed to sell 17 branches with $492 million in deposits in New Mexico, the only region where the two companies overlapped enough to concern regulators.

The boards of San Francisco-based BankAmerica, the nation's fifth-largest bank, and Charlotte, N.C.-based NationsBank, the third-largest, are set to approve the merger Sept. 23. It was announced April 13.

"They fit very well together," said Diane Casey, who tracks bank regulatory actions for the accounting firm of Grant Thornton. The U.S. Justice Department gave its approval to the merger Friday.

The new company, which will keep the BankAmerica name and be based in Charlotte, will have 29 million customers in 22 states, and offices in 39 other countries. As a bank holding company, it will have nearly $570 billion in assets.

The combined company will control almost 8.5 percent of the nation's bank deposits, near the 10 percent limit that any bank can have under federal law.

The proposed sale of the 17 branches and their $492 million in deposits amounted to roughly a third more than the two banks had initially told regulators they expected to sell. Still, the sale should have little impact on the new combined bank, analysts said.

"We are talking about an institution that is going to have total assets of $550 billion," said Casey. The proposed sale "is not that large."

Outside New Mexico, there's very little overlap between the two companies because BankAmerica is concentrated on the West Coast and NationsBank operates in the Southeast, the Midwest and the mid-Atlantic region.

At the time of the merger announcement, BankAmerica and NationsBank said they expected annual profits of $10 billion after the merger, partly the result of cutting as many as 8,000 jobs, 4.4 percent of their combined work forces of 180,000. Many of those jobs will be eliminated through attrition, said NationsBank spokesman Elision Claire.

Hugh McColl, NationsBank's chairman, will be chairman and chief executive of the new bank and will be succeeded eventually by BankAmerica's chairman, David Coulter, who will be president.

The BankAmerica-NationsBank merger is one of the flurry of major bank combinations announced this year.

Texas-based Sheshunoff Information Services counted 10 bank mergers valued at more than $1 billion in the first half of this year.

Pub Date: 8/18/98

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