First Indiana Eyeing Branches Banc One Might Have to Divest

Based in a city dominated by regional banks, First Indiana Corp. in Indianapolis has found in-market acquisitions hard to come by. But the proposed merger announced Monday of Banc One Corp. and First Chicago NBD Corp. may change that.

Columbus, Ohio-based Banc One and First Chicago NBD hold the Hoosier State's top two market positions, and a marriage could force the pair to divest some branches to cut costs and avoid antitrust allegations. That is good news for community banks, such as $1.7 billion-asset First Indiana, that have been looking for growth opportunities.

But First Indiana would face competition for those branches. Midsize regional banks such as Columbus, Ohio-based Huntington Bancshares and Cincinnati-based Fifth Third Bancorp could also be expected to bid for any divested branches, analysts said.

Nonetheless, "I'm elated for my bank," said Robert H. McKinney, First Indiana's chief executive officer. He added that he is already in line to bid for any available offices.

Indianapolis is one of the few markets where Banc One and First Chicago have significant duplication. Yet bankers and analysts say community banks in other Midwest cities could capitalize on the megamerger as well, if it happens.

In Chicago, where the merger would eliminate the First Chicago name, community banks could market themselves as homegrown, bank analysts said.

Banc One's planned takeover would mark the first time a megabank has been able to gain significant market share in the Windy City. Stephen Skiba, a bank analyst at ABN Amro Chicago Corp., said if past mergers outside Chicago are any indication, "the retail customers will suffer, and that is an opportunity for small banks."

Chicago-area community bankers said they did not have any specific marketing plans to attract First Chicago NBD customers who might be looking for a change, but they say they are confident they would benefit from any upheaval.

"We who live on the bread crumbs will do very well," said Richard Reiser Jr., president of $950 million-asset First Oak Brook (Ill.) Bancshares in suburban Chicago. "We'll fill ourselves up on what falls between the cracks."

In Michigan cities such as Detroit, Lansing, and Grand Rapids, customers who stuck with NBD Bank through its 1995 merger with First Chicago may have their loyalties tested, said Michael M. Moran, a bank analyst with Roney & Co in Detroit.

"It is somewhat staggering how much regard the old NBD has had in this state, and there was a very little dent put into it with the First Chicago merger," he said of the state's market leader. "Now there is a crack of daylight, and that plays well for small banks."

Franklin Bank in Southfield, Mich., is already positioning itself to pull in some First Chicago NBD customers in the event of a merger. As it has done after past merger announcements, the $500 million-asset bank is creating an advertising campaign that pokes fun at the parties who plan to wed.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER