The pending merger between Chemical Banking Corp. and Chase Manhattan Corp. would create one of the nation's largest providers of corporate banking services.
But, not surprisingly, many consolidation issues would have to be resolved before the new Chase could fully flex its wholesale muscle.
Chase and Chemical, both strong cash management and securities-related service providers, operate similar - and profitable - transaction processing subsidiaries.
Chase's Infoserv, which handles all of the bank's global custody, cash management, funds transfer, and corporate trust business, is one of the top international transaction processing services. Diane B. Glossman, an analyst with Salomon Brothers, placed the unit's net income last year at $136 million on revenues of $675 million.
Chemical's Geoserve, also a major provider of cash management, funds transfer, and corporate trust services, generates more than $750 million in revenues and nearly $100 million in net income, according to sources at Chemical.
"Geoserve and Infoserv are fairly complementary," said Hal McIntyre, a managing partner with the Summitt Group, New York. "They will blend in well, but their problem will be in integrating their back offices and their two very complicated sets of applications."
Chemical has had some practice on this front. It acquired Geoserve in the merger with Manufacturers Hanover Corp. and recently overhauled it in preparation for expansion.
The Chase merger would be more of the same, though on a larger scale.
The new bank would be faced with integrating two complex sets of back- office systems and operating styles. Meanwhile, experts said, competitors would be trying to capitalize on the merger upheaval.
Rivals are "dying to know" the merged bank would focus on," said David Bochnovic, an executive vice president with Phoenix Hecht of Research Triangle Park, N.C.
The two banks have overlapping services in several areas of the wholesale business, but each has distinct areas of specialty.
For instance, in securities processing, Chase has a better reputation in global custody. It is the nation's second-largest custodian, with $213 billion in assets, and was one of the original providers of such services. Services provided by global custodians include multicurrency reporting, accounting, trade execution, settlement, safekeeping, and income collection.
Chase also ranks among the top banks in winning new business in Europe, Australia, Hong Kong, Japan, and Latin America.
Chemical, with about $130 billion in global custody assets, is a strong player, observers said, but not as strong as Chase.
However, Chemical is dominant in other areas. It is known for its middle-market cash management and treasury management software packages, called Chemlink and Interplex. These rank as the top programs in their respective areas, according to last year's cash management survey by Ernst & Young.
Chemlink, a transaction and information reporting product for corporate customers, is designed for the middle market. It has about 8,000 customers and 28,000 accounts.
Interplex treasury workstations are designed for large corporations. There are about 400 installations, bank officials said.
On the international cash management front, Salomon Brother's Ms. Glossman said Chase is winning a bigger share of new business as corporations consolidate banking relationships. The Chase name is "highly prized in Asia," she said.
Mr. Bochnovic said Chase had been quitting certain businesses in domestic cash management in order to focus on international companies.
But he added that Chase had more relationships on the larger, more profitable end of the market. The combined bank, Mr. Bochnovic said, should have a market penetration in the large corporation market of about 37%. This share would make the new Chase second only to BankAmerica Corp.
"The new bank distributes well across the nation," said Mr. Bochnovic. "As you'd expect, they are both very strong in the Northeast," but Chemical's Texas Commerce subsidiary also would provide the merged bank with a good market share in the Southeast regions.
Chase "seems to have a better presence with companies on the West Coast," Mr. Bochnovic said.
Chemical ranks first in the corporate trust business, with $850 billion in outstanding principal. In this business, the bank acts as a transfer and disbursing agent, a shareholder record keeper, and dividend payer.
Other players, such as Bank of New York Co. and First Bank Systems Inc.'s First Trust, are threatening to bump Chemical from its perch, but it is nonetheless a leader in trust.
