NationsBank Corp.'s entry into the securities underwriting business is the latest step in the bank's quest to raise its profile with corporate customers.
"We feel this will drive the value of the NationsBank relationship up in the eyes of our customers," said Robert Hollmeyer, chief operating officer of the company's securities subsidiary, NationsBanc Capital Markets.
The North Carolina-based superregional on Monday received approval from the Federal Reserve Board to underwrite corporate debt and equity through the subsidiary.
Expected to Wait on Equities
The bank can begin underwriting corporate debt immediately, but is not expected to underwrite equities for up to 18 months, pending a further review by the Fed.
Only two other major U.S. banks have equity powers - Bankers Trust New York Corp. and J.P. Morgan & Co.
Full corporate debt underwriting powers were previously given to Bankers Trust, Chase Manhattan Corp., Chemical Banking Corp., Citicorp, and Morgan.
"Over time this may prove to be important to NationsBank because debt underwriting is a necessity for serving sophisticated corporations in a full capacity," said Diane Glossman, an analyst with Salomon Brothers.
Fifth in Corporate Loans
NationsBank is already a leader in the corporate loan business. It arranged syndicated loans totaling $42 billion for 41 corporate borrowers in the second quarter, ranking it fifth according to Loan Pricing Corp.
The bank's new corporate debt underwriting business will not give an immediate lift to earnings from corporate banking, said Judah Kraushaar, analyst with Merrill Lynch & Co. But, taken together with the bank's pending purchase of derivatives powerhouse Chicago Research and Trading Group, NationsBank will be able to offer significant new products for its corporate clients, he said.
"If they can carefully manage the business, they may well be on to something in terms of sizable future incremental earnings," Mr. Kraushaar said.
Mr. Hollmeyer said the bank has no firm underwriting assignments at this point.
NationsBanc Capital Markets increased its capital by $90 million to $150 million at the end of last year,to support its plans for securities underwriting as well as other activities, said Mr. Hollmeyer.
Five foreign banks have full corporate debt and equity securities underwriting powers, and another has full debt powers.