The new Firstar Corp. could double in size if the right deal came along, chairman and chief executive officer Jerry A. Grundhofer says.
In an interview after his first presentation to shareholders since Star Banc Corp. of Cincinnati and Milwaukee-based Firstar merged in November, Mr. Grundhofer said Tuesday that the post-merger integration is on schedule and that the "combination would accelerate anything the two companies could do separately."
Another large deal probably would not happen until integration has been completed, he said.
Firstar, which has $38 billion of assets, could buy a like-size bank. The difficulty is in finding a willing seller, Mr. Grundhofer said.
With a stock market value of $22.5 billion and shares that closed Wednesday's trading up 25 cents to $103.6875, Firstar is in a fine position to make another large deal, analysts said.
The company's executive team has had plenty of experience with acquisitions and in managing large organizations. Mr. Grundhofer is an alumnus of Wells Fargo & Co. and BankAmerica Corp.
On Tuesday, Firstar reported first-quarter net income of $169.6 million, up 22%, and earnings per share of 25 cents, beating the consensus estimate by 4 cents.
Joseph Duwan of Keefe, Bruyette & Woods Inc., said Firstar may make a large deal outside its existing markets. He gave as an example buying St. Louis-based Mercantile Bancorp.
Mercantile's asset size is close to that of Firstar, but Firstar's market value is considerably higher. Mercantile would not comment on merger speculation.
Mr. Grundhofer also would not discuss any particular deal, saying he wants to ensure that the current integration runs smoothly. However, he said a deal to expand Firstar's reach beyond Illinois, Iowa, Kentucky, Ohio, Minnesota, and Wisconsin would be attractive.
"I like geographic extension," Mr. Grundhofer said. "I think I have a preference toward that, but that doesn't mean we wouldn't do something in- market.
"There are some benefits to geographic extension, and our management style accommodates that. I think we've proven in the past we have a pretty good record in growing revenues and also understanding expenses."
Richard Davis, Firstar's vice chairman and head of retail banking, said computer system integration should be completed by September. The names on all former Star Banc locations have been changed to Firstar, and the company already is cross-selling products, he said.
Mr. Grundhofer told investors that mergers would be an important part of the company's strategy, but he emphasized, "Bigger for the sake of getting bigger is not better."
Unlike the shares of other large banking companies involved in mergers, Firstar's stock has risen steadily since the deal was announced in July.
Mr. Grundhofer said execution is the key.
"This combination is as advertised," he said. "Maybe some of the other (mergers) have disappointed. We did what we said we would do. There's not smoke and mirrors here. It's real stuff."