BankAmerica Rattles Washington State

After acquiring Security Pacific, BankAmerica will operate in 10 Western states, ranking first in market share in four of them. But nowhere will the deal's tremors be felt more than in Washington State.

Joined together, the Washington units of the two Western banking giants will form a $20 billion colossus more than three times the size of its nearest rival.

Rivals Are Worried

Unless pruned back by anti-trust restrictions, the combined institution will hold about 50% of Washington's commercial banking deposits. Their share will total 30% of the combined deposits of the state's banks and thrifts.

That prospect worries the pair's rivals -- especially the larger ones. They foresee a BankAmerica with tremendous advantages in distribution and marketing. And if expected cost savings are realized, the merged bank may operate at an efficiency level others won't be able to match.

"Over the long term, BankAmerica's heavy market concentration raises the question of whether we can compete effectively," said a high-ranking executive of U.S. Bancorp, parent of Washington's third-largest bank. He added, however, that he was confident his bank could meet the challenge.

In the short term, the Washington economy could also take some lumps if, as expected, 10% to 15% of the more than 10,000 jobs at the two banks disappear. The commercial real estate market will be weakened as the combined bank vacates offices and storefronts.

Seizing the Opportunity

But many bankers said they see a bright side to the deal. Some are raiding employees and customers from the two big banks. Several are eager to scoop up any branches that BankAmerica may have to divest to comply with antitrust laws.

"This is an opportunity for us," said Deanna Watson Oppenheimer, senior vice president at Washington Mutual Savings Bank, the state's largest independent thrift. "There will be customers looking for alternatives."

"In the short run, the competition will have a field day with dislocated customers," agreed R. Jay Tejera, an analyst with Dain Bosworth, Inc., Seattle. "But in the long run, BankAmerica will be very potent."

Antitrust Problems Held Likely

The wild card of the merger: antitrust concerns. The linkup of Washington's two biggest banks will probably run afoul of regulations prohibiting undue market concentration, banking experts said.

BankAmerica's dominance will be moderated by strong competition from thrifts and credit unions, but it could still be forced to shed some branches. With regulators in a liberal mood on antitrust, major cuts in the scale of the combined bank are not seen as likely.

"Given the present regulatory climate, any divestitures would not have a significant effect on operations," said Patrick D. McVey, a Seattle lawyer and antitrust expert.

Long-Time Competitors

The merger puts an end to a rivalry that goes back generations in the Evergreen State.

San Francisco-based BankAmerica acquired Seattle-First National Bank, the state's largest, in 1983.

Los Angeles-based Security Pacific Corp. bought what was then known as Rainier National Bank, the No. 2 Washington bank, four years later. The two had been the Hertz and Avis of Washington banking, bitter rivals that dominated the market.

"They are the two leading banks in the state and have been for years," says Thomas H. Oldfield, the state's banking supervisor.

Earlier Problems Fixed

Seattle-First, better known as Seafirst, overcame wrenching loan problems in the early 1980s and cemented its position as Washington's banking leader.

Security Pacific Washington has performed well financially. But its market position has slipped since the buyout because of service disruptions and the loss of the old Rainier identity. What's more, deep cost cutting has put hundreds of employees on the street and shaken the morale of those left behind, Security Pacific sources say.

As Security Pacific's market position has eroded, several competitors have been nipping at its heels.

The merger will give BankAmerica overwhelming firepower in the battle for big-ticket customers. "They will get most of the quality commercial business," said Lawrence R. Vitale, analyst with Kemper Securities Group Inc.

Dominance in Retail

In addition, competitors could be outgunned in the mass consumer market. "It will force everybody else into a niche strategy," said Mr. Tejera of Dain Bosworth.

Community banks with a reputation for providing personal service may actually benefit from the combination of the state's two giants.

And many larger institutions already have carved out market niches. Washington Mutual and Canadian-owned Pacific First Bank, the state's two largest thrifts, focus on home lending and investment products. Washington units of First Interstate Bancorp and KeyCorp specialize in small-business lending and try to imitate community-style banking.

Tacoma-based Puget Sound National Bank has built its market share by harping on its status as a homegrown institution. "This merger is further proof that we are the last major independent bank left around here," said Gordon C. Piercy, the bank's marketing director.

No. 3 Seen as Vulnerable

The state's third-largest commercial bank was formed by Oregon-based U.S. Bancorp when it bought two midsize banks in the late 1980s. Since then, it has created a strong local identity and built its position as a mass-market competitor. Analysts say it has the most to lose from the merger.

"There is no way they can go head-to-head with BankAmerica," Mr. Tejera said.

Gerry B. Cameron, U.S. Bank of Washington's president and operating chief, disagrees. "There is bound to be fallout in customer service and employee morale" at BankAmerica, he said. Indeed, U.S. Bank, part of U.S. Bancorp, targeted Security Pacific business customers after the Rainier acquisition, which helped it increase its commercial loans 38% in 1989.

Privately, U.S. Bank officials acknowledge they are under pressure. But they say it remains to be seen whether U.S. Bank will be too small to compete on an equal footing with BankAmerica.

Given U.S. Bank's success in establishing itself in Washington, many are prepared to give them the benefit of the doubt.

"If you judge by their track record, you could say they are going to be O.K.," said Robert C. Anderson, executive vice president of the Washington Bankers Association.

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