SPECIAL REPORT: MERGERS 1st Chicago, NBD Pool Midwest Clout
First Chicago Corp. and Detroit's NBD Bancorp said they would merge as equals, in the latest of a wave of consolidation deals. Valued by SNL Securities at $5.1 billion, the deal will create a bank called First Chicago NBD Corp., which will be headquartered in Chicago and have $120 billion of assets.
PNC Bank Corp. has agreed to buy Midlantic Corp. for $3 billion, in a deal that would catapult the Pittsburgh-based bank into the No. 2 market position in both New Jersey and the Philadelphia-Trenton marketplace. The deal would create the 11th-largest bank in the country, with $76 billion of assets.
First American Corp., Nashville, said it would move into second place in a fast-growing suburban market by buying First City Bancorp of Murfreesboro, Tenn. The $51 million stock swap for $343 million-asset First City would also move First American into first place in market share in the Nashville metropolitan area.
If size were everything, then First Chicago Corp. executives would have come out on top in the $72.4 billion company's merger with NBD Bancorp. Analysts said the two banks were determined to leverage NBD's stellar reputation for credit quality while insuring that both banks have a hand in leading the new company.
PNC's plan to acquire Midlantic would give Pittsburgh-based PNC, already a major bank marketer of mutual funds and annuities, access to new customers in New Jersey and greater Philadelphia.
18493 WASHINGTON Clinton Taps Official For FDIC Board Slot
Joseph H. Neely, Mississippi's banking commissioner since 1992, will be nominated to the Federal Deposit Insurance Corp. board, the White House announced. If confirmed as expected, Mr. Neely would bring the FDIC's five- member board to full strength for the first time since August 1992.
Steven C. Sunshine, a deputy assistant U.S. attorney general who directs all merger reviews, says the rapidly consolidating banking industry should not worry that his department will stand in its way. "I don't expect antitrust to be a defining force in the marketplace," he says.
The Federal Reserve Bank of Chicago said in a study that banks reject marginally qualified minority borrowers more often than whites. The findings, by Chicago Fed research director William C. Hunter, support a controversial 1992 study by the Boston Fed.
Insurers and banks want the Supreme Court to resolve this year whether banks can sell insurance and the states can regulate bank entry into that market.
Shifting its position on a key issue, America's Community Bankers, the thrift industry's main trade group, wants its members to pay $6.1 billion this year to capitalize the Savings Association Insurance Fund.
A House Banking subcommittee canceled a vote on legislation to modernize the Federal Home Loan Bank System, casting serious doubt upon the prospect for broad system reform.
18535 REGIONAL BANKING Superregional Banks Resume LDC Lending
Superregional banks, which bailed out of overseas lending a decade ago, have plunged back in. The 10 largest regionals last year increased their loans and securities investments in lesser developed countries by 21%, according to an analysis by Brown Brothers, Harriman & Co. That compares with a rise of 8% at a group of 140 U.S. banks.
Kai S. Nargolwala, head of BankAmerica's Asian wholesale group, has resigned and will be replaced by the head of the European wholesale group. Mr. Nargolwala said he was quitting for personal reasons unrelated to his or his unit's performance.
Stronger loan demand and a shift toward higher-yielding assets drove second-quarter earnings up 28% at Bank of New York Co., to $226 million, while extraordinary gains in the same period last year caused a 10% decline at J.P. Morgan & Co., to $315 million. Analysts said results at both banks were broadly in line with expectations.
18541 COMMUNITY BANKING Risk Software Seen Becoming Standard
Use of asset-liability management software is expected to explode in the next decade at small banks - a part of the industry where chief financial officers, in the modern sense, were rare just 15 years ago.
About 200 of California's smallest banks are fighting to exempt the California Bankers Association group health insurance plan from the health care reform the state enacted last year.
The Small Business Administration wants to harvest new customers in rural states, where it is courting farmers who have rarely used its products in the past.
Sparks State Bank, a Maryland community institution, beat back a legal challenge from dissident shareholders - with 83% of the vote - and agreed to be acquired by the largest bank based in the state, Mercantile Bankshares of Baltimore.
18550 SMALL BUSINESS NationsBank Offers PC Account Access
NationsBank Corp. has joined the growing ranks of banks offering PC- based account services for small-business customers. Last month, it began marketing Business Express/PC in all nine states where it does business.
18416 COMPLIANCE Bank Brokers Rated Via On-Line Service
San Francisco-based Prophet Market Research has developed a data base system called ProphetWatch, using mystery shoppers who visit selected bank branches and survey the effectiveness of investment product sales people.
Industry officials are cheering a disclosure form being developed by the Federal Reserve Board that would clarify car leasing for consumers. Bankers feel it would reduce the legal and administrative costs that stem from the complex contracts currently used.
18494 CREDIT UNIONS Madison 28 Give Banks a Tough Time
Madison, Wis., is home to 28 credit unions and the industry's dominant trade group, the Credit Union National Association. "They're very, very tough competition in our marketplace," says E. David Locke, president and chief executive officer of McFarland State Bank.
Examiners from the National Credit Union Administration decided that Western Corporate Federal Credit Union shouldn't keep an undisclosed amount of underwater investments in the "hold-to-maturity" accounting category. The institution must come up with a plan by the end of August outlining how it will either sell the securities or keep them until their value rises.
18176 CREDIT/DEBIT/ATMs Multi-Use Smart Card Finds Receptive Public
Nearly two-thirds of respondents said they would be interested in a card that consolidates health care, financial, and government information, according to a survey commissioned by the Smart Card Forum.
In a splashy ceremony in New York featuring Ringo Starr, Jane Seymour, and Florence Griffith Joyner, Discover unveiled its new Private Issue credit cards.
With the summer shaping up to be a sizzling season of big bank mergers, rumors are flying that a similar shake-up will cause a shakeout among the regional electronic banking networks. The on-again, off-again merger talks between Chicago's Cash Station Inc. and Detroit's Magic Line Inc., for example, look to be very much on again.
Electronic Data Systems Corp. plans to launch a money transfer service this fall that will allow automated teller machine cardholders to send money anywhere in the country to anyone they designate - whether or not the intended recipient has an ATM card.
18189 INVESTMENT PRODUCTS Bank's Clients Trust In Its Social Worker
Mercantile Bancorp.'s Jeannie Keyes is not your typical trust employee. A social worker, she focuses on the personal needs of 60 elderly clients in the St. Louis area. "They've had the means to buy privacy," she says, "but later on, that privacy can turn to isolation."
A midyear look by a handful of bank executives suggests that the growth slide in certificates of deposit that began in April may accelerate in the near term if the Federal Reserve cuts rates further. During the last week of June, the latest Fed data reported, consumer CDs grew at an annual rate of only 6.24%. That's the slowest pace since last summer.
The Securities and Exchange Commission has raised a red flag over one of the hottest new investment products at banks and brokerage firms - mutual fund wrap accounts. The SEC recently ordered a Nebraska investment advisory firm to dismantle its wrap account on grounds that it had not been properly registered under federal securities laws.
18195 MORTGAGES Thrifts' Originations Slip 42% in Early '95
The top 100 thrift originators reported mortgage volume fell by more than 21% in the first quarter, to $19.1 billion. For the thrift industry as a whole, the drop was steeper - 42%, to $27.1 billion.
A burst of energy is expected in the mortgage industry in response to the Federal Reserve's decision to cut the federal funds rate from 6% to 5.75%. Many lenders adjusted interest rates downward the day of the Fed announcement.
Lenders are increasingly shunning the securitization of home equity loans in favor of selling them whole, according to market sources.
Gerry Baker is a big guy. He rides a big Harley Davidson through the Carolina hills on weekends. And he spends the rest of the week running a big mortgage company - Fleet Mortgage Group - of which he has been chief executive since November.
18522 TECHNOLOGY Intuit Sells a Raft Of Banks on Quicken
Industry sources said 19 major banking organizations and nonbank financial services companies are expected to sign with Intuit, including such luminaries as American Express Corp., Citicorp, Chemical Banking Corp., Chase Manhattan Corp., First Interstate Bancorp, First Chicago Corp., Smith Barney, and Wells Fargo & Co.
The acquisition of Midlantic by PNC Bank Corp. should produce big cost reductions through back-office consolidation because of the banks' overlapping markets.
With the right kind of marketing to a well-chosen group of customers, banks can boost self-service transaction volumes and thereby reduce operating costs substantially, research sponsored by the Bank Administration Institute indicates.
Bank of Boston announced that it will team up with Microsoft Corp. to offer on-line banking services via personal computer, becoming the latest financial institution to align itself with the software giant.
18424 FINANCE Bank Stocks' 12.4% Gain Tops S&P 500
The stocks of banks and other financial companies capped a vigorous half-year performance. The American Banker index of the nation's 225 largest publicly traded banks advanced 12.4% in the second quarter, compared with an 8.8% gain for the Standard & Poor's 500 stock index.
Analysts expect most of the nation's largest banks to post improved results for the second quarter, with earnings per share rising on the strength of loan growth, firm credit quality, and stock repurchases. A survey by First Call Corp., an American Banker affiliate, says 37 of the nation's 50 largest banking companies are expected to post higher earnings per share than in the second quarter of 1994.