Wall Street's megamerger is pushing BankAmerica Corp. onto the acquisition trail.
Three weeks after Dean Witter, Discover & Co. and Morgan Stanley & Co. announced their plans to merge, BankAmerica is actively hunting for money management and brokerage businesses.
BankAmerica vice chairman Michael E. O'Neill, speaking last week at a Montgomery Securities investment conference here, said that acquisitions would help his company gain the size needed to compete with leading securities firms.
"We've received a lot of calls about what we want to do since the Morgan Stanley-Dean Witter deal," Mr. O'Neill said.
Although BankAmerica has a sizable presence in money management and brokerage among banking companies, Mr. O'Neill said his bank is still far from being dominant among all players.
While BankAmerica manages $53 billion in customer assets-which includes mutual funds and trust and private banking accounts-the combined Morgan Stanley Dean Witter Discover would manage $271 billion of assets. Merrill Lynch & Co., the next biggest, has $234 billion.
"One of the shortcomings of (BankAmerica) today is on the asset management side," said Mr. O'Neill, who is also BankAmerica's chief financial officer.
Acquiring a money management firm "will be a very important move for us," he added. BankAmerica officials "have been spending a lot of time trying to resolve that issue."
"I think there's a gap," he said. "You either buy it or build it. It's very expensive to buy it and building it is very difficult."
While BankAmerica may feel the urge to merge with money management and brokerage firms, history can shown that U.S. banks have passed up far more opportunities than they have seized.
U.S. banks aren't willing to pay as much for these firms as European banks and nonbanks, experts say. But that may change as the field heats up. In fact, many banks are said to be looking closer at asset management deals in the wake of the $10 billion deal between Morgan Stanley and Dean Witter.
Last month, J. Christopher Flowers, managing director at Goldman Sachs & Co.'s financial institutions group, predicted that U.S. banks would be dominant buyers of asset management, securities and insurance companies in the coming years.
"They're faced with the challenge that they want to get into the business but to do that it's going to be expensive," said Joseph K. Morford, an Alex. Brown Inc. analyst.
In January, BankAmerica reportedly held merger talks with PaineWebber Corp. Mr. Morford sees that pairing as unlikely but said he believes BankAmerica will look seriously at other firms.
He added that any acquisition would likely be a business with a nationwide presence, or at least command a big presence on the West Coast.
In recent months, BankAmerica has been closely scrutinizing its various business lines. It has invested in some-it bought a $1.8 billion equipment leasing portfolio from Ford Co.'s USL Capital last July-and divested of others, including some branches in Texas.
Montgomery Securities analyst Diane Merdian said she believes the bank will now focus its acquisition engeries on nonbank properties such as securities firms.
"Acquisitions could be very important in a number of areas," Mr. O'Neill said.
Banking is "not just about geography anymore," he added. "You've got to look at where you're not earning acceptable returns." As a result, he said, BankAmerica is selling or closing some bank locations.
Mr. O'Neill acknowledged that some bank markets, including Texas, have been challenging and are not performing up to expectations.
When asked if BankAmerica would consider exiting Texas, he said there were no markets that BankAmerica wouldn't consider leaving.
Mr. Morford, the analyst, said he wouldn't be surprised if BankAmerica divests of its Texas or Hawaii banks. In Texas, "they've been trying to find the right strategy to make it work," he said. "I don't think they have the critical mass they're looking for."
