SPECIAL REPORT Vanguard Sees No-Load Fund Dominance
John C. Bogle, chairman and chief executive of the Vanguard Group of Investment Cos., has built the nation's second-largest mutual fund company on the conviction that people are becoming savvier about investing. They're inclined to take charge of their finances, he believes, and they don't see a need to pay someone else for advice.
American Express' financial planning unit sees banks as fierce rivals - and potential allies. David R. Hubers, its chief executive, shrugs off the apparent contradiction: "We haven't really found any banks that are doing what we're doing today."
David W.S. Chambers, chairman and chief executive officer of Merrill Lynch, knows that he and his employer are causing more than mild consternation among bank trust executives nationwide. With $27 billion of trust assets now under management, Merrill is projecting $100 billion by the end of the decade.
Haunting banks like a shadow is a hallmark of Jones & Co.'s strategy. The firm has become one of the nation's leading brokerages by setting up shop across the street from banks and picking off affluent customers who want more than passbooks and checking accounts.
19215 WASHINGTON Fed Weighs Freeing Capital Decisions
In what Fed Chairman Alan Greenspan described as a major step into the future of banking regulation, the Federal Reserve Board proposed letting banks decide for themselves how much capital they need to set aside for their trading operations.
The House Banking Committee began work on regulatory relief legislation that appears threatened by partisan bickering and industry opposition to provisions limiting national bank insurance powers. June 22
A new breed of mutual thrift takeover has surfaced in the states of Maryland and Washington. It works like this: A mutual voluntarily dissolves, following decades-old procedures. A bank or thrift then buys the loans and deposits, and the mutual's depositors get the leftover capital.
The controversial retirement CD is in legal peril, putting the future of the annuity-like bank product in jeopardy. A federal judge is expected to decide soon whether American Deposit Corp., inventor of the CD, can block the Internal Revenue Service from taking away the product's tax-deferred status.
Senate Banking Committee Chairman Alfonse M. D'Amato and several colleagues accused banking agency officials of abusing a legal doctrine that lets them void failed banks' oral contracts.
19107 REGIONAL BANKING 1st Union in Record Deal for 1st Fidelity
With the announcement of their merger, First Union Corp. and First Fidelity Bancorp. broke new ground in at least two ways: transaction value and geographic coverage. The $5.4 billion indicated value is the highest in U.S. banking history, and the deal would create the first superregional to span the East Coast.
Venturing into Missouri for the first time, Union Planters Corp. said it had reached a definitive agreement to acquire Capital Bancorp of Cape Girardeau, which has $982 million of assets. Union Planters said it agreed to pay $114 million in stock, or 1.56 times Capital's book value of $20.50 a share.
Wells Fargo & Co. and Nikko Securities Co. said they had agreed to sell their joint money management venture to Barclays PLC of London. The firm, Wells Fargo Nikko Investment Advisors, has $171 billion under management and is one of the largest in the area of index funds, which tie their portfolios to stock and bond market indexes.
A Santa Ana, Calif., jury has found California Federal Bank and three former executives guilty of fraud and racketeering for allowing a subsidiary to default in 1991 on loans from Weyerhaeuser Mortgage Co. The verdict assessed $31.5 million of punitive and compensatory damages, equal to just more than two-thirds of the Los Angeles thrift's expected earnings this year.
In a move that aroused further uncertainty over where Bankers Trust New York Corp. is heading, Timothy Y. Yates, 48, the bank's chief financial officer, announced that he is planning to retire. He will leave this summer and use his remaining time at the bank to "finish the implementation of the many initiatives we now have in progress." The bank did not announce a successor to Mr. Yates.
19220 COMMUNITY BANKING Exec Finds Rewards On the Front Line
Two years ago, J. Michael Kapp chucked a promising career at Wachovia Corp. to take the reins of a deeply troubled community bank in South Carolina. Now, with Bank of Columbia back in the black, Mr. Kapp has few regrets.
Banding together has helped community banks unwilling to be preyed upon by larger institutions. The smaller banks are bidding in groups on branch divestitures by regional banks - a tactic that proved successful in the Midwest this year.
Community banks in the Northeast aren't sure what to expect from their new competitor, First Union Corp., but they're hoping to rake in a pile of new customers disenchanted by First Fidelity Bancorp.'s merger with the Charlotte, N.C., giant.
Concern about a plan to make banks help shore up the Savings Association Insurance Fund has led the Maryland Bankers Association to derail temporarily a merger with the state's major thrift trade group.
Over the protests of West Virginia's bank commissioner, a handful of national banks are about to hop across the state line - some in and some out - using the "30-mile rule."
19152 SMALL BUSINESS SBA Adopts Fair Isaac Credit Scoring System
To improve efficiency and consistency, the Small Business Administration will use Fair, Isaac & Co.'s small-business credit scoring system nationwide to process low-documentation loan applications.
19036 COMPLIANCE New CRA Software Wins Users' Raves
Some of the biggest banks in the country - including Chemical, Wells Fargo, and NatWest - are entrusting their Community Reinvestment Act compliance to a new software product. The product, dubbed CRA Wiz, lets users analyze their own lending patterns - and their competitors'.
In a major victory for the industry, U.S. District Court for the Western Division of Texas ruled that Marfa National Bank was simply complying with federal currency-transaction law - not violating financial privacy law - when it reported two depositors' suspected crime to the government.
19145 CREDIT UNIONS Marketing Takes Lead At Pentagon Federal
Pentagon Federal Credit Union is concentrating on retaining its 418,000 members by cross-selling products and addressing services as its military sponsors cut back.
Tight liquidity, which the industry faced last year, is expected to be relieved as lending dips and deposits flow into credit unions. But net income will suffer as the cost of funds increases.
18790 CREDIT/DEBIT/ATMs Amex Taps Ex-Banker For New 'Virtual' Unit
American Express Co. solidified its commitment to virtual banking when the New York-based financial services giant hired Citicorp veteran William J. Heron Jr. to head up its Financial Services Direct unit.
First Chicago, which plans to hire more than 400 employees this year, is bucking the downsizing trend among credit card issuers. Scott Marks, chairman of the card unit, has said it will likely open another processing and customer service facility.
Visa U.S.A. may not be completely satisfied with its big legal victory when the Supreme Court blocked Dean Witter, Discover & Co. from appealing an earlier antitrust decision that went Visa's way. Visa has countercharges pending against its nonbank rival, including fraud and trademark infringement.
Credit quality of consumer loans declined in the first three months of 1995, for the second consecutive quarter, an American Bankers Association index showed. Delinquencies in credit card loans worsened at a faster rate than the composite index.
The founder and former chairman of SafeCard Services has sued American Express Co. Peter Halmos is carrying forward a legal battle that has raged since his ouster from SafeCard at the end of 1992.
18791 INVESTMENT PRODUCTS U.S. Trust Is Put on Defensive in Court
U.S. Trust Corp. finally got its day in court but found itself on the defensive over its handling of the estate of tobacco heiress Doris Duke. The two-hour hearing in a New York appellate court produced no immediate decision.
BankAmerica Corp. has decided to drop a Standard & Poor's rating on a controversial money market fund after months of effort to regain the credit agency's approval.
Though a new survey indicates that young people are desperately seeking investment advice, many bankers apparently are uninterested in targeting this segment of the market.
MaryAnn Bruce, who runs Oppenheimer Management's sales through banks, began flooding her clients with telephone calls this month. She hoped to avert a firestorm over the resignation of a star portfolio manager, John Wallace of the Main Street Income and Growth Fund.
18776 MORTGAGES HUD to Sell Rights To Insurance Fees
Moving to create a new type of financial asset, the Department of Housing and Urban Development intends to sell the rights to receive insurance premiums on $50 billion of government-backed home loans. Observers said the package could fetch $1 billion.
Two agencies have oversight authority for Fannie Mae and Freddie Mac - to regulate different functions. But a report by the Office of Housing Enterprise Oversight suggested that the regulators' paths will sometimes cross.
Citicorp Mortgage, once a giant in the residential mortgage industry, is closing its Connecticut processing operation, eliminating 100 jobs.
R. Harold Owens, hired in April to help form a consumer finance unit, has abruptly left Keycorp to become executive vice president and chief operating officer at World Acceptance Corp. His departure came as Keycorp maps ambitious plans to lend to borrowers with tainted credit histories.
The evidence is mounting that a new boom in mortgage refinancings is just around the corner. The Mortgage Bankers Association's raw index of application volume jumped 47% for the week ended June 9, and refinancing activity rose 83%.
19150 TECHNOLOGY Wall St. Sees Bars To First Data Deal
Wall Street insiders are speculating that First Data Corp.'s pending acquisition of First Financial Management Corp. may unravel. Securities analysts and other observers say the companies may have difficulty clearing antitrust hurdles or encounter competing bids.
Graphic: 1x3 mac front page
Third-party providers are increasingly operating home banking platforms that can work with multiple devices - touch-tone and screen phones or personal computers.
Of all the forums offering help to bankers and others interested in new forms of electronic commerce, Commercenet may be among the more hospitable. As one of a new breed of cross-industry consortiums, Commercenet rallies its members around the notion of cooperation, says executive director Cathy Medich.
General Electric Information Services says it will offer electronic data interchange services on the Microsoft Network, an on-line service that is to begin operating this summer.
Jack Henry & Associates said it has signed a letter of intent to acquire Broadway & Seymour's core banking software business. Officials of both companies described the pending deal, valued at $12 million, as a merger between two technology houses rather than an acquisition.
19160 FINANCE Rising Rates Fueled '94 Business Loans
Bank lending to businesses soared in 1994, reflecting strong corporate demand and a revival of commercial real estate finance. Bankers attributed the surge to the need for short-term, floating-rate loans as interest rates rose during the year.
One column graphic, pg.1: Realty Rebound
Citicorp announced a $3 billion share repurchase program. The nation's largest banking company has been under pressure to follow the lead of many money-center peers in spending large sums of excess capital on stock buybacks.
About $17 billion of Citicorp debt was placed under review for possible upgrading by Standard & Poor's ratings group. The agency placed the debt on credit watch with positive implications, noting the company's strong capitalization.
After a series of downbeat economic reports, the latest survey by the University of Michigan offers evidence that consumer confidence will lift bank earnings a while longer.
Bank stocks soared June 19, propelled by both a growing likelihood of lower interest rates and enhanced prospects for industry consolidation. Sentiment continued to grow that the Federal Reserve would begin cutting rates this summer to rejuvenate the sluggish economy.
Graphic: 2x3 mac on BIG GAINERS, back page