WASHINGTON -- Thomas G. Labrecque, chairman and chief executive of Chase Manhattan Corp., said the banking industry's revival will endure because the business has fundamentally changed.
"Banking is a much more focused business," Mr. Labrecque said at a press conference here Tuesday night. "That's healthy. It allows us to really pick the businesses we do well."
Focusing on specific businesses also will help banks avoid lemming-like disasters.
Playing Follow-the-Leader
During the 1980's banks followed each other from crisis to crisis: farm, energy, LDC, real estate lending. Mr. Labrecque said he does not think another industrywide credit problem will arise. "I think the herd instinct has slowed down a lot," he said.
Mr. Labrecque said that is one reason Chase will not set up a retail operation in Mexico if the North American Free Trade Agreement is ratified.
Other than in Hong Kong, Chase plans to focus its retail banking in the United States.
"You have to have real added value" to enter new retail banking markets, he said. Chase would have to be able to take deposits and make loans better than local bankers in Mexico.
"It's a high-fixed-cost, low-variable-cost business, and with that you need market share," he said. "From my point of view, it's not a good use of our capital."
That said Mr. Labrecque added that he is big fan of Nafta.
"It's absolutely essential for this country," he said of the free-trade treaty, predicting that Nafta will lead to job growth and an economic boom.
Thus, he does not believe critics who claim the trade deal will siphon U.S. jobs to Mexico. "Economic activity is not a zero-sum game," he said.
Mr. Labrecque also predicted that Congress will approve Nafta. At that point, Chase will offer such wholesale banking services in Mexico as corporate finance and information services, he said.
New Legislation Not Seen
Mr. Labrecque said he does not think Congress will tackle banking legislation in the next 18 months to two years. "I wouldn't recommend it either," he said.
But clearly, Chase, as well as other large banks, is itching for the right to expand freely across state lines, into the securities markets, and into the insurance business.
"Some form of financial service holding company is going to happen. It has to happen," Mr. Labrecque said.
He acknowledged that Washington's interest in derivatives has been piqued and admitted that the business "takes an incredible amount of control and systems." But Mr. Labrecque said the banks offering and using derivatives are managing them well.
"It isn't an explosion waiting to happen," he said.
Addressing past problems, Mr. Labrecque said Chase would not have to reserve as much in the third quarter to cover weak real estate loans. He would not cite a figure but said the loan-loss provision for the quarter would be less than the second quarter's $225 million.
