The consolidation in the banking industry, which is expected to halve the number of banks nationwide by the year 2000, will leave community banks largely unscathed, a survey says.
Instead, the mergers will take place mainly among the approximately 300 big banks in the country, a trend already evidenced by the megadeals of this past summer, according to Steven A. Savia, chairman-elect of the Institute of Management Consultants.
"We can be bullish about community banking," said Mr. Savia, who also heads the Sage Group, a Palo Alto, Calif.-based consulting firm that conducted the survey. "I don't believe the number of banks will be cut in half in five years, if ever."
Mr. Savia, who has 20 years' experience in the financial services industry, said he believes that the 300 or so big banks will continue to merge with each other, reducing their numbers to about 100 by the turn of the century. The effect on the overall number of banks in the industry, therefore, will be minimal, he said.
Most believe that the total number of banks and thrifts, about 12,000 today, will fall to around 6,000 within the next five years.
Mr. Savia's contrary conclusions arise from responses of about 100 community bankers in nine states in the Western and Mid-west.
Most noteworthy in the survey, Mr. Savia believes, is that 93% of the bankers responding said that, all things being equal, they would prefer to remain independent.
"That tells me that people in independent banking are not just looking to make some money and then ride off into the sunset," Mr. Savia said. "These are people who desire to serve their community and believe they can be profitable doing it. I did not expect that high a number."
The numbers behind the acquisition frenzy this year bear Mr. Savia out.
Though the amount of assets changing hands through acquisitions so far this year is more than three times that of all of 1994, the total number of acquisitions of small banks actually has declined from last year, according to SNL Securities Inc. in Charlottesville, Va.
So far this year, 220 banks with less than $3 billion of assets have been acquired, which is well behind last year's pace when 409 such acquisitions occurred, according to SNL.
So, while the total number of mergers is increasing dramatically, fewer of those involve community banks.
Far and away the largest bulk of the $45 billion in deals done to date this year came from the headline-making pacts such Chase Manhattan Corp.- Chemical Banking Corp. and First Union Corp.-First Fidelity Bancorp.
The Sage Group's survey suggests that surviving small banks will be in the range of $250 million to $3 billion in assets. They will have the critical mass necessary to offer product diversity and larger loans, while catering to the flourishing small-business sector, he said.
There will continue to be a market for the hallmarks of community banking, namely personal service and help for entrepreneurs, Mr. Savia said.
Small banks that do choose to sell will do so primarily if their regulatory burdens and technology needs increase, or if a high price is offered, the survey found.
