Surprisingly, the Senate's approval of the interstate banking bill Tuesday was greeted by yawns from the investment banking community, which presumably would benefit from any surge in interstate acquisitions.
Investment bankers said the legislation won't noticeably boost bank merger activity which already is running at a record pace - except in a few small states where restrictive laws have remained in place.
"It has been a loug time coming, but like most legislation affecting banks, the effects, if any, were felt some time ago," said Gerard L. Smith. managing director at Salomon Brothers. "The fact that it might impact Missouri, Alaska, or the Dakotas does not make a difference."
The bill's main benefit is to allow banks to enter states by opening branches, rather than creating separate subsidiaries.
For superregionals like Banc One Corp., and NationsBank Corp., the law is expected to bring about major cost savings.
It will allow these banks to eliminate unnecessary boards of directors and organizational charts among their far flung operations, but otherwise business will continue as usual, said Bob Baer, senior managing director at Bear, Stearns & Co.
H. Rodgin Cohen, a bank lawyer with Sullivan & Cromwell, New York, said the Senate approval marks the end of a long, evolutionary process. It will not revolutionize consolidation by any means, he added.
In certain states - like Kansas, Missouri, Maryland, and some southeastern states - which heretofore did not have reciprocal banking laws with other states, the bill could increase M&A activity, he said.
Eric D. Hovde of Hovde Financial Inc., a Washington, D.C.based investment bank that caters to community. banks nationally, said the bill could held banks enter California, which has been dominated largely by in-state banks.
NationsBank has made no bones about wanting to enter the Golden State, he said, so the bill is one more barrier knowcked out ot its way.
Institutions like California Federal Blink, Glendale Federal Bank, and even First Interstate Bancorp would be attractive acquisition targets to a large superregional, he said.
"This law won't be the sole root cause, it is just another barrier removed for consolidation to take place," he said.
David T. Lazar, a managing director with Berwind Financial Group and formerly president of Ryan. Beck & Co., said the real impact could be on consunaers.
Banks need to examine how consumers will react when interstate banking, combined w'ith advances in technology, provides them with top quality service.
A consumer may switch banks if one is now operating in many states and another is not, he said. lfa bank is not willing to make the commitment to operate multistate branches, he concluded, it needs to ask itself whether it retain its consumers, and should it sell.