The blockbuster deal between Firstar Corp. and U.S. Bancorp would sideline two of the industrys most active acquirers.
Firstar, of Milwaukee, and U.S. Bancorp, of Minneapolis, have grown primarily through mergers, and they continue to be mentioned as suitors for such regional players as Amcore Financial Inc. of Rockford, Ill., and Bay View Capital Corp. of San Mateo, Calif.
But in a conference call with reporters and analysts Wednesday, Firstar president and chief executive officer Jerry Grundhofer said the companies plan to take a break from dealmaking as they work through the details of a merger that would create the nations eighth-largest bank company.
We are not interested in acquisitions, said Mr. Grundhofer, who would be president and CEO of the combined $160 billion-asset company. We believe we are through.
Jay Tejera, senior vice president at Ragen MacKenzie in Seattle, said that announcement is bad news for regional banks looking to be acquired.
U.S. Bancorp which acquired three Southern California banks last year had been rumored to be eyeing the troubled $6 billion-asset Bay View to gain a foothold in Northern California, Mr. Tejera said. U.S. Bancorp was also said to be looking at Unionbancal of San Francisco and City National Corp. of Beverly Hills. Those rumors ended Wednesday with the announcement of the Firstar deal.
Firstar, meanwhile, had apparently had Amcore in its sights.
In May a top Firstar executive told a Rockford newspaper that the company would be interested in buying Amcore if management showed an interest in selling. That raised the hopes of many Amcore shareholders who were frustrated with the $4.4 billion-asset companys stock price and had been clamoring for it to sell.
Jim Kitzinger, a principal of Kitzinger, Lautmann Capital Partners in Milwaukee, said that the deal with U.S. Bancorp takes Firstar out of the mix for the time being, but that the company could still use a strong position in Rockford.
While the new U.S. Bancorp may not pursue big deals, Mr. Grundhofer said it would not rule out community bank acquisitions. Mr. Grundhofers brother, U.S. Bancorp chairman and CEO John Grundhofer, has clearly expressed interest in small California banks.
If something opened up in California, Mr. Tejera said, I think these guys would figure out a way to work it out.
Christopher Raffo, senior vice president at Podesta & Co. in Chicago, is not so sure. He said that he had expected U.S. Bancorp to make a play for $1 billion-asset Eldorado Bank in Tustin, Calif., but that now he does not expect the combined company to do many more community-sized deals.
This probably raises the bar in terms of what they will buy, he said. I really dont see them buying a $1 billion dollar shop or lower.
Mr. Tejera said the combined Firstar-U.S. Bancorp could pose more competition for community banks, especially in the Pacific Northwest.
Community banks in that region have prospered in recent years by capturing many of U.S. Bancorps defectors. Firstar, however, has a reputation of being more retail and small-business friendly than U.S. Bancorp, Mr. Tejera said. Firstars consumer accounts grew 22% last year, while U.S. Bancorps increased just 6%, he said.
If Firstar can have anywhere near that success in Oregon, Washington, and Idaho, then its going to be a real challenge for community banks, he said.