After languishing in the shadows of BankAmerica Corp.'s correspondent banking business, the partners in this year's New York megamerger have finally surpassed the San Francisco giant.
The new Chase Manhattan Corp., formed by the merger of Chase and Chemical Banking Corp., reported an average correspondent balance at June 30 of $3.48 billion. That's almost half a billion dollars higher than BankAmerica - No. 2 at $3.06 billion according to American Banker's annual rankings of the top correspondent banks.
In a year that continued to witness some of the largest mergers in banking history, both Chase and BankAmerica saw increases of between 11.9% over their balances in June 1995. The top 74 banking companies as a whole increased their balances by an average of 19.09%.
The top 249 commercial banks, as a group, increased their balances by an average of 17.6%.
(The commercial bank rankings, which begin on page 8, list Chase Manhattan Bank and Chemical Bank separately because their merger closed after June 30, the date from which the data were drawn. The holding companies had merged previously.)
And Chase executives are brimming with confidence not only over their current success, but also their future prospects.
"Chase is not only the largest, but is also the best-positioned," said Yawar Shah, senior vice president in charge of correspondent banking for Chase. "The issue isn't just being bigger than somebody else. The issue is being fundamentally better.
"I certainly see Citi and Bank of America in the marketplace, and I respect them as competitors. (But) I am convinced that no other bank is able to provide the global resources to do what is required to be successful in this marketplace as well as Chase."
Officials at BankAmerica remain undeterred by the strengthened competition from Chase.
"We are (both) banks with very strong capital resources," said Dick Fletcher, senior managing director of BankAmerica's domestic financial institutions group. "We are certainly competitors, but it's a healthy competition."
Officials at Citicorp could not be reached for comment.
This year's correspondent ranking reflects some of the significant changes to hit both correspondent banking and the industry as a whole.
Rather than a dying field, as it has been termed by some observers, correspondent banking remains a growing business, especially as more banks become specialized and turn to outsourcing for nonessential services. Instead of just "peddling products," Mr. Shah said, banks are cooperating to help each other strategically.
Average correspondent balances for the year ended June 30, 1996 were about $36 billion industrywide, the highest in three years. But that doesn't reflect total business because many correspondent providers are now being paid through fees, not deposit balances.
Megamergers between key players and consolidation of subsidiaries thinned some of the industry's leaders, allowing many companies to leapfrog their competitors and bringing completely new players into the list. In fact, 66 of the 249 banks on this year's list were not ranked last year.
And many more community banks are creeping onto the list, becoming more active in correspondent banking themselves.
But while the mergers have thinned the upper ranks, they've also strengthened the survivors, Mr. Shah said. The remaining banks have greater scale to invest in new products and technology, and can cross-sell to their customers the best products of both parties.
