As Others Retrench, New Chemical Will Seek a Dominant Global Role
LONDON - Chemical Banking Corp. is setting big international goals for itself after it merges with Manufacturers Hanover Corp.
The aim is to be the premier American commercial bank abroad, outgunning money-center rivals and reversing a trend of retrenchment among U.S. banks overseas, according to Herb Aspbury, who is to be the European group executive of the enlarged Chemical.
Head Start on Competitors
"The combined bank will be well out in front of the next nearest [U.S.] competitor," Mr. Aspbury proclaimed in a recent interview.
He identified foreign exchange trading, currency and interest-rate swaps, syndicated loans, and private securities placements as product areas in which the merger would bring extra clout. In some areas, the combined bank would be among the world leaders.
Mr. Aspbury, 46, hails from Millbrook, N.Y., and joined Manufacturers Hanover in 1967.
He started as a lending officer, covering accounts on the West Coast until 1973. After a brief spell at the Bank of California, he returned to Hanover in 1974 and has since worked chiefly in the wholesale area, servicing major corporate accounts.
J. Nicholas Hurd, managing director of Russell Reynolds Associates Inc. described Mr. Aspbury as the "quintessential corporate banker."
Hurd, who heads the executive recruitment firm's U.S. commercial banking practice added: "We get to look at a lot of bankers. Herb Aspbury, more than most, has a handle on the market."
Often a Contrarian
That sometimes leads the banker to challenge accepted wisdom, but his often contrarian views are backed up with sound judgment from "spending a lot of time in the market to understand what's going on," Mr. Hurd said.
While Chemical has the upper, acquirer's hand in the merger due to be completed by year-end, there is little surprise that a Manufacturers executive will take charge of Europe.
Shrinkage by Chemical in recent years has left it with only two main overseas offices, in London and Frankfurt.
Hanover Bigger on Continent
Hanover has a much more extensive, continental European network, with presences in Frankfurt, Oslo, Milan, Paris, Madrid, and Istanbul as well as London.
Manufacturers has 1,000 employees in Britain, compared with Chemical's 500.
Mr. Aspbury said the impending merger was already bringing significant benefits that are helping to lay a solid international foundation for the new Chemical Bank.
Among the benefits is a reduction in Chemical's and Hanover's funding costs because the merger has been received positively by other international banks, corporations, and clients.
That is helping to dispel what he called the "American banking stigma" that has developed overseas as a result of U.S. banks' weak profits and their continuing retrenchment in Europe.
A New Profile
"Our treasury people have already noted a change in the perception of the bank in terms of [funding] availability and pricing," Mr. Aspbury said.
In swaps trading, counterparties are more willing to do business with the two banks for maturities as long as 10 years - another sign of growing confidence.
In recent months, recurrent downgrades of U.S. banks' ratings and concerns about real estate and corporate loan exposures have led to a careful scrutiny overseas of credit exposures to American banking, industry analysts said.
Data from the Bank for International Settlements show that U.S. banks' borrowings from the overseas interbank currency deposit markets dropped $18 billion in the first quarter of 1991, one of the biggest declines on record.
Some Still Reluctant
Despite widely favorable reactions to the Chemical merger, a "small group" of overseas counterparties were still reluctant to increase their exposures, said Mr. Aspbury, who relocated to London from New York in September.
"I think that they will probably wait until we either actually merge the bank or get a single-A rating," he said.
The merging bank hopes to secure an A rating from Standard & Poor's Corp. by the end of this year and AA within three years.
Analysts said the combined bank should also benefit from continued shrinkage of other big U.S. banks overseas, particularly by capital-strapped Citicorp.
Mr. Aspbury acknowledged the "withdrawal of so many U.S. banks from Europe since [London's] Big Bang means it could be very lucrative business for those that stay."
No |Loan Junkies'
About $20 billion of the combined banks' $135 billion of assets will be international, he indicated, though he cautioned there would not be an open-ended drive to put on new commitments overseas.
"We've all been weaned away from being loan junkies," he said.
Among the products the merged bank will be promoting, he said, are:
* Foreign exchange, where Chemical currently is a major force in professional trading while Hanover specializes in services to customers.
Chemical was voted the top currency trading bank in a poll published by a London magazine, Euromoney, earlier this year.
* In international syndicated loans, Chemical arranged $14.9 billion of facilities in the first half of 1991, against $8.8 billion for Hanover, according to International Financing Review, an affiliate of the American Banker.
Their combined total is substantially more than that of the next biggest U.S. rival, Citicorp's $12.6 billion.
* In LDC debt trading, the two banks last year together handled a total $21.5 billion of transactions - well ahead of the top-ranked J.P. Morgan with $16 billion.
* Hanover arranged $160 billion of interest rate and currency swap agreements last year and Chemical $51 billion.
Their aggregate business should rival that of Citicorp as well as Britain's Barclays PLC and Midland Bank, the three market leaders currently, Mr. Aspbury indicated.
Networking in Europe
"With other capabilities like mergers and acquisitions and project advisory, one of our major strategies is to be the U.S. bank that European multinational corporations are going feel it's essential to include in their international transactions and business," he said.
"The 1980s have been tough years for American banking. Third World loan |exposures and, more recently, real estate and corporate loan problems have weakened our banks at home and abroad," Mr. Aspbury said.
"We want to rebuild a business that will reflect the international influence, prestige, and importance American banking used to enjoy in the 1970s."