NationsBank Seen Unlikely To Push for Global Clout
In announcing their planned union, NCNB Corp. and C&S/Sovran Corp. said the merged entity would be large enough to compete in "domestic and global marketplaces." But the fact is, for NationsBank, foreign operations aren't likely to be much more than a sideshow.
"They don't look at international as anything more than something you've got to do in order to be a full-service bank to your customers," said Cecil Phillips at Phillips International, an Atlanta-based investment company. "It's very much the tail on the dog."
That's the way many big U.S. banks have come to view their overseas operations, and with ample justification. For U.S. banks, forays into Europe and Japan have been costly, while Latin American lending has been downright disastrous.
Trade Finance Is Crucial
Nonetheless, certain of NationsBank's international services are crucial to keeping customers satisfied. Among the most important is trade finance, particularly letters of credit.
As with other international services, NCNB has been more aggressive in this area than has its merger partner, C&S/Sovran. Since 1986, NCNB has nearly tripled its commercial letters of credit outstanding to $620 million. By contrast, C&S/Sovran has increased its letters of credit only 50%, to $353 million, during the same period.
While it seems unlikely that NationsBank will greatly increase its international presence in the short run, the merger could make foreign operations more profitable. "Trade finance has thin margins," Mr. Phillips said. "The more volume you build up, the more money you make."
Roster of Nations
In terms of foreign offices, NCNB far outstrips C&S/Sovran. NCNB owns a London stock broker, Panmure Gordon Bankers Ltd., and an Australian bank subsidiary, NCNB Australia Holdings Ltd. In addition, NCNB has bank branches in London, the Cayman Islands, Singapore, and Nassau, and representative offices in Sydney, Frankfurt, and Mexico City.
C&S/Sovran's foreign operations are limited to branches in Nassau and the Cayman Islands, and representative offices in Singapore and London.
Said a spokesman for C&S/Sovran: "The bottom line is we do very basic sorts of things and don't go far from home."
By joining forces with NCNB, C&S should pick up foreign heft and knowhow. This, combined with the increase in asset size to $118 billion, could eventually help win NationsBank more internationally minded customers.
"Acquisitions add a whole new dimension in size," said one banker at NCNB who declined to be identified. "You double your size and you get to market your services across a much broader marketplace." [Tabular Data Omitted]