First Union Corp.'s planned acquisition of CoreStates Financial Corp. will give the North Carolina banking giant a valuable international network that would have taken years to build from scratch.
"First Union has reached a size where it couldn't ignore international business any more," said Lawrence Cohn, a banking analyst with Ryan, Beck & Co. "This will instantaneously give them a framework they can use to serve their customer base."
Although it is one-third the size of $144 billion-asset First Union, Philadelphia-based CoreStates, which has $47.5 billion in assets, has a far bigger and older international network that includes offices in 27 countries and more than 1,200 correspondent banking relationships. The bank is also a major force in international funds transfers and documentary processing for letters of credit.
First Union has an equally large number of correspondent banks, but its international network was, until recently, limited to two offices, in the Cayman Islands and in the Bahamas.
As part of its expansion over the last two years, the bank set up a joint venture with Hong Kong Chinese Bank Ltd. and opened representative offices in South Africa and Djakarta. Two similar offices are planned for Cairo and Istanbul.
Officials at CoreStates declined to comment on the implications of the deal, saying discussions are under way to determine how best to integrate the banks' operations. However, Andrew Oleksiw, senior vice president and managing director of First Union's international division in Charlotte, N.C., termed the deal "a plus" for both banks.
"The message is that this is a very positive development," Mr. Oleksiw said. "We view this as an enhancement to our international strategy."
Analysts predicted that the deal would enable First Union's enormous middle-market customer base to take advantage of CoreStates' services and give the combined operation ample growth in coming years.
CoreStates provides services, such as trade finance and funds transfers, that will give First Union "a nice, solid, risk-averse business with an opportunity to be much more substantial than it is," Mr. Cohn said.
"This fills a void for First Union," said Diane Glossman, a banking analyst with Lehman Brothers. "With CoreStates, they get a much more extensive network and a set of relationships in the international/trade services arena they didn't have before."
