BankAmerica Corp.'s plan to sell its 166-branch retail network in Texas is likely to spark spirited bidding by big banks active in the state.
"Everybody will be interested," said William Strunk, chairman of Strunk & Associates, a Houston consulting firm. "You name it."
San Francisco-based BankAmerica, unhappy with the returns on its Texas retail business, announced this week that it would seek to sell its Texas branches and their $4.4 billion of deposits.
The four largest bank companies in Texas- NationsBank Corp. of Charlotte, N.C., New York-based Chase Manhattan Corp., Banc One Corp. of Columbus, Ohio, and Norwest Corp., Minneapolis-would probably be bidders, analysts said. None of the banks would comment on the matter.
The network would probably fetch about $440 million, or a 10% deposit premium, observers said. BankAmerica received a deposit premium of approximately 10% for 68 rural branches it sold in Texas last June.
In an interview Thursday, BankAmerica chief financial officer Michael E. O'Neill said the company would sell the branches and deposits for cash only.
"Our expectation is that someone already in Texas will view this as an interesting add-on to their operations," Mr. O'Neill said. "There are plenty of interested parties."
The move to exit Texas follows a game plan the company laid out last year: to shed businesses that do not fit long-term strategy or that fail to meet profitability goals.
"We reluctantly concluded it was going to be ... a very long haul to generate acceptable returns on equity" in Texas, Mr. O'Neill said. "We've been working for years to try and turn the thing around, but decided it would not be possible."
The bank took a $112 million charge in the third quarter to cover its withdrawal from Chicago-area supermarkets. In October, it placed its mobile-home financing unit, BankAmerica Housing Services, on the block, and last May, the company sold its $1.8 billion-asset Hawaii savings bank.
"This is what they've been signaling," said R. Jay Tejera, an analyst with Dain Rauscher Inc. in Minneapolis. "This is a recognition of a couple of things: They have a lot of work to do, and No. 2, they want to concentrate on their dominant place in the West."
BankAmerica entered the Texas retail market in 1991, when it purchased some of the assets and liabilities of Village Green National Bank of Houston from the federal government. It followed with acquisitions of Commerce Federal Savings Association in San Antonio, Sunbelt Federal Savings in Dallas, and First Gibraltar Bank in Irving.
Mr. O'Neill said it was impossible to generate high enough returns to justify remaining in the state.
Several analysts pointed to Norwest as the most likely buyer.
"Norwest has been the most aggressive acquirer in Texas," said Campbell K. Chaney, an analyst with Sandler O'Neill & Partners, Walnut Creek, Calif. "They have been dancing around in the smaller Texas towns, so this is their big chance to buy in the bigger cities."
For Norwest, Chase, and Banc One, buying from BankAmerica would nearly double the number of branches each company has in the state.
NationsBank's Texas presence-the largest in the market at more than 350 branches-would increase by over one-third.
One potential buyer not mentioned by analysts is Cullen/Frost Bankers Inc., the largest Texas-based banking company. Richard W. Evans, chairman and chief executive officer of the $5.2 billion-asset bank, said Thursday he would only be interested if BankAmerica was willing to sell the network off in parcels. Analysts, however, said this is unlikely.
Regardless, Mr. Evans said he is eager to learn more about the deal.
"I'm interested in taking a close look at what they are selling," he said.
With $5.3 billion of Texas assets, half of which are not for sale, BankAmerica would still retain a sizable presence in the state even after a deal is concluded. Most of the company's corporate banking, credit card marketing, student loan, home equity, and mortgage operations in the state would remain with BankAmerica, according to Mr. O'Neill.
"We are still an important provider of financial services in the state," he said.
With a closed sale of the Texas operations, BankAmerica would be just about finished with its planned major divestitures. Mr. Tejera said the company may sell its small consumer bank in New Mexico, and its $2 billion- asset Canada bank.
However, Mr. O'Neill said that any further sales would be relatively small in scale. The company will focus on whether to shed particular products, business units, relatively minor geographical presences, and less-than-profitable customers.
"I see nothing really significant left to do in terms of major businesses, but I see lots of work to be done at the edges to continue to improve profitability," Mr. O'Neill said.