Banc One Corp. has received approval from the Federal Reserve Board to expand the securities activities of its section 20 subsidiary, Banc One Capital Corp.
Armed with so-called Tier 2 powers, granted on Monday, the subsidiary can now add corporate equity and debt underwriting to its menu of capital markets products and services. The unit already houses Banc One's merchant and investment banking operations and works closely with its loan syndication, asset securitization, and structured finance groups.
"I think if we're going to be competitive in the future, we're going to have to do not only private placements, but public deals,"said David R. Meuse, chairman and chief executive officer of Banc One Capital Holdings Inc., of which the section 20 unit is a subsidiary. "With the Tier 2 powers, we can do a lot more public deals."
The unit will launch a corporate debt operation this year, and expects to take on equities next year after enlarging both its staff and infrastructure. Based in Columbus, Ohio, Banc One Capital currently has 256 employees and will hire more, but on what Mr. Meuse calls an "evolutionary basis."
"We haven't taken the wholesale approach of going out and hiring a whole bunch of people to head up departments very quickly," he said. "What we're trying to do is more of a generative process of developing talent and working, consistent with the bank's growth, to develop and accommodate the needs of the bank and the customers."
The bank has yet to name a head of the debt operation.
Banc One was the first commercial bank to purchase an investment banking group when it acquired Meuse, Rinker, Chapman, Endres & Brooks Inc. in 1990. That firm formed the base for the bank's section 20 operation.
According to Mr. Meuse, Banc One Capital is once again looking to buy - or form a joint venture with - a niche securities firm.
"We'd be very active in acquisition of niche firms that have a real speciality in a certain industry or a certain type of trading. That's the way we want to add expertise," he said.
Focused primarily on the Midwest, Southeast, and Southwest, the unit has already developed specializations that parallel those of the commercial bank - in real estate, insurance, print media, energy, health care, and consumer finance. Most of its clients are middle market companies with annual sales of up to $250 million, said Mr. Meuse.
The bank was prompted to apply for the new powers by the Fed's recent loosening of restrictions on section 20s, such as the removal of firewalls that restricted cross-selling and management interlocks with parent bank companies. More than a dozen additional firewalls are slated for elimination by the Fed this year.
