Top executives of two companies that typify the financial industry's current rush to bigness suggested Thursday that the merger and conglomeration process may only now be shifting into high gear.
Speaking at conferences in separate cities but sounding common themes about the need for quick and bold action, Kenneth D. Lewis of NationsBank Corp. and Philip J. Purcell of Morgan Stanley, Dean Witter, Discover & Co. said their industries are far from finished.
"We are approaching the endgame," said Mr. Lewis, president of NationsBank, which he said is intent on living up to its name by buying more banks.
"I cannot overemphasize the importance of sheer size and scale in today's environment," Mr. Lewis said at the American Institute of Certified Public Accountants' 22d annual banking and thrift conference in Washington.
Mr. Purcell said mergers to date have been mainly domestic and within industries, such as NationsBank's deals for Boatmen's Bancshares and Barnett Banks Inc. and the Morgan Stanley-Dean Witter combination, of which he is chairman and chief executive officer.
The removal of historical legal barriers will lead to consolidation on a global, cross-industry scale.
"We are about to go from $20 billion deals to $100 billion deals," Mr. Purcell told the 26th annual Securities Industry Association annual conference in Boca Raton, Fla.
"Don't be surprised to see Chase, NationsBank, Citicorp, or Banc One combine with a major securities firm," Mr. Purcell said. "Or a major European bank like UBS or Swiss Bank combine with one of the largest U.S. securities firms or banks."
Though they could not have known it, and despite their general agreement on the overriding trends, Mr. Lewis and Mr. Purcell engaged in something of a long-distance debate-largely over NationsBank's strategy and what it means for further bank-nonbank struggles.
Mr. Purcell used the Charlotte, N.C., institution to make his point about rampant acquisitiveness.
He said its purchase of Montgomery Securities "can be regarded as batting practice, but very serious batting practice."
"Does anyone really believe that NationsBank's investment banking ambitions are confined to high-technology companies and IPOs and to less than 1% of its market capitalization?" Mr. Purcell said, alluding to Montgomery's underwriting speciality.
(He also said it is unlikely that NationsBank's North Carolina neighbor, First Union Corp., would limit itself in the securities arena to its Wheat First Butcher Singer acquisition.)
Mr. Lewis was contradictory. "Montgomery Securities was the end of our desire to buy an investment banking firm," he said. "We did that not for earnings because, as somebody said, that's two or three days' earnings for NationsBank."
The acquisition, which closed Oct. 1, "was more a play for our customers," Mr. Lewis continued. NationsBank was "losing pieces of business because we didn't have that capability. ... So we're happy and satisfied and don't see any further expansion in that area by acquisition."
Neither are investment management acquisitions in the cards: "We've always had an interest in expanding that core base of business, but have never found the right fit due to cultural issues and prices, so we at the moment are expanding internally as fast as we can," Mr. Lewis said.
Becoming a truly nationwide bank "represents our ambition," NationsBank's No. 2 officer told 1,000 accountants at the AICPA meeting. "We plan to continue to expand geographically. That is what we do best, and so, yes, we will buy more banks."
Saying the consolidation wave is a few years from cresting, Mr. Lewis asserted: "Banks must embrace change or fail. Banking is essential to the economy. Banks are not."
But he said commercial banks have an "endgame" advantage over securities companies.
The eight largest commercial banks have $166 billion in capital, he pointed out, and the top eight investment banks have $30 billion. "Guess who's going to win that game?"
"Our customers trust us more than they do nonbanks and other financial services providers. We've got to capitalize on that." At the same time, banks must "act like nonbanks when it counts," expanding their product lines and developing more effective sales cultures.
From the nonbank perspective, Mr. Purcell contended that institutional customer demands for single sources of research, products, and liquidity around the world will be the driving force behind the supermergers he foresees.
The consolidation makes brand identities more crucial than ever in the financial services industry, he said, as individual customers deal more with cash machines and cards than with people.
"The goal of the financial services brand will be to give global clients the same confidence in quality as Coke or the Golden Arches," said Mr. Purcell.
No one in the industry has yet accomplished that, Mr. Purcell said, though he added Citibank and American Express are working on it.
In the past, some commercial banks failed to meld their cultures with those in the hard-driving broker-dealer world. But after his speech, Mr. Purcell said some relationships work and others simply do not, whether they involve commercial banks or not.
Mergers that cross industries "can be done," he said.