Pickier Banc One Holds Out for the Right Deal

Banc One Corp. may have been absent from last year's consolidation craze, but the company did a lot of looking - and will do the same in 1996, chairman and chief executive John McCoy said in a recent interview.

"We believe we can make a bank earn only so much," Mr. McCoy said. "We were involved with a number of transactions last year. We thought the price was too high, so we didn't participate."

Of course, Banc One doesn't have to acquire in '96. But Mr. McCoy said that if a list exists of the 30 largest takeover targets, "I will have talked with every one."

Banc One, which has $90.5 billion in assets, has always sought acquisitions that would be immediately accretive to earnings. Now, Mr. McCoy said, the company has become more selective and disciplined about potential transactions. "It used to be our belief that anything for sale we would buy."

Yet earnings projections he's hearing from takeover targets are too low, he said. "I think some of the smaller banks have hit the wall. It used to be you'd go in to talk to a bank and they'd say they expect 12% to 15% earnings growth, and you always subtract 5% for the lie factor. Now, they're saying they see 3% growth."

Some basic tenets are still intact at Banc One. The company doesn't plan to buy any banks more than one-third its size. And Mr. McCoy said he doesn't like mergers of equals, noting, "I haven't seen one work yet."

William Boardman, who oversees the bank's acquisition strategy, said his company is primarily interested in buying banks with more than $10 billion in assets and nonbanks.

When First Interstate Bancorp was looking for a white knight to fend off a hostile bid from Wells Fargo & Co., it turned to Banc One. Though First Interstate eventually chose Minneapolis-based First Bank System Inc. as its white knight, Mr. McCoy said he appreciated the opportunity to participate.

While Banc One will consider buying anywhere, Mr. McCoy said he particularly admires growth patterns in the Southeast and Southwest. "Having grown up here in the Midwest, I'm sure impressed with states that have positive population growth," he said.

Last year, Banc One talked to Firstier Financial Inc., Omaha; Fourth Financial Corp., Wichita, Kan.; and Integra Financial Corp. of Pittsburgh.

Fred Cummings, an analyst with McDonald & Co., said he believes Banc One should purchase a consumer finance company. Mr. Cummings particularly likes $14 billion-asset Beneficial Corp. "People's expectations for Banc One are to be a superior performer," he said.

However, there are also a number of bank acquisitions that would complement Banc One, including First of America Corp. in Kalamazoo, Mich.

In Missouri, Mr. Cummings believes either of the large St. Louis companies, Boatmen's Bancshares or Mercantile Bancorp, would be a good fit.

Expanding in markets such as Virginia or Tennessee might also make sense for Banc One. Mr. Cummings believes Banc One would be interested in either Central Fidelity Banks Inc. or Crestar Financial Corp., both based in Richmond, or First Virginia Banks Inc. in Falls Church.

In Tennessee, Banc One might be a buyer of First American Corp. in Nashville, or First Tennessee National Corp. or Union Planters Corp., both of Memphis.

James Weber, an analyst with A.G. Edwards, said Banc One will focus on contiguous states. He believes Mid-Atlantic, Southeast, and Midwest states are the likely expansion areas.

Who Banc One acquires next and when that occurs will also depend on the target bank. "The question is, who wants to dance with us?" Mr. McCoy said.

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