The nation's 300 largest banks saw assets grow by 9% last year, from $2.4 trillion in 1992 to $2.6 trillion, as acquisitions continued at a feverish pace.
A survey by the American Banker shows that deposits also grew by 4.9% in 1993, up from a meager two-tenths of a percent the year before when low interest rates flushed deposits into mutual funds at a record pace.
The survey also found that the total number of employees at all FDIC-insured commercial banks increased 1.1%, the first increase in industry employment in four years. Mergers helped push employment at the top 300 banks of 1993 up by 3.4%.
Some analysts say that banks are seeing improvement because of the slow-growing economy. However, the primary reason was the appetite the top 300 banks continued to show in 1993 for smaller rivals.
"I would bet that some portion of that growth, if not a large portion, is driven by consolidation," said Dennis F. Shea, regional banking analyst at Morgan Stanley & Co.
The survey was compiled from financial results reported by banks. The data include information on interest-bearing and non-interest accounts in domestic and foreign offices.
Analysts predict the flurry of acquisitions will continue in 1994, whittling down the number of midsize banks (those with $10 billion to $50 billion of deposits), creating an industry divided into national, regional, and small community banks.
While other nations have relatively few charters, the U.S. industry continues to shrink from its peak in 1984 with 14,483. "All of these [savings banks, savings and loans, credit unions, and commercial lending banks] do basically the same thing now," said Michael Iannaccone, an analyst at Adams Cohen Securities in Great Neck, N.Y. "So, there's no reason to have all these subsets."
One of the most dramatic examples of the acquisition story is Kansas-based Fourth Financial Corp., which has acquired 52 banks over the last nine years, including nine acquisitions in 1993 and another four that haven't closed yet.
After Fourth Financial made those acquisitions, Bank IV Kansas and Bank 1V Oklahoma, subsidiaries of Fourth Financial, came in at 126th and 250th, respectively, in the survey.
Buying Assets
Bank IV Kansas captured $4.9 billion in assets in 1993, up from $4.5 billion in 1992. Bank IV Oklahoma grew from $1.0 billion in assets in 1992 to $1.9 billion in assets in 1993. These figures don't even include the four acquisitions still pending, which would add another $1.4 billion in assets.
"Most of the growth in our balance sheets has been from acquisitions," said Brent Thompson, a senior vice president at the company.
Fourth Financial was typical. While larger deals were closed, smaller banks showed the largest year-over-year growth. The largest increase came at Colorado National Bank in Denver, which saw assets grow 200% from $2.4 billion to $7.2 billion after five deals.
Other big winners include Bank of America in Irving, Tex., which increased assets by 172% to $9.4 billion from $3.4 billion.
Banc One of Chicago increased assets by 170% from $619 million in 1992 to $1.7 billion in 1993. Also, Magna Bank of Belleville, Ill., increased assets by 159% to $2.9 billion from $1.1 billion in 1993.
AmSouth Bank of Florida in Pensacola increased assets by 142% from $1.1 billion in 1992 to $2.6 billion in 1993.
A byproduct of acquisitions has been an increase in the number of bank employees among the top 300 institutions. However, analysts are hard pressed to predict whether the number will fall this year.
They say it's unclear whether banks have pared down operations enough to achieve acceptable profit levels and start hiring again. They add that efficiency ratios must drop to the mid-50s range. "The way they usually do business is they stretch their resources to the limit before they start hiring people," Mr. Iannaccone said.
