The recent spate of monster merger deals may resolve the perennial debate over whether bigger really means better in banking, according to a growing number of industry watchers.

In fact, bigger means bigger risks, say analysts at Standard & Poor's Corp. Data systems might seize up instead of delivering efficiencies, and errant subsidiaries could strain managerial resources. After dissecting various promises made by banking companies planning mergers, Charles Rauch of S&P's financial institutions group concluded, "The synergies are less than they would appear on paper."

The vast reach of these prospective combinations constitutes a hazard of its own, said S&P's Tanya Azarchs. Problems could develop "as these things become very widespread, scattered all over the globe," she said.

The analysts offered their comments in a conference call to investors Thursday. They joined other critics who have wondered, in the aftermath of April's six megamerger proposals, whether the combined operations would be able to deliver.

Their views matter because S&P follows banks from an equity standpoint and also bestows ratings that affect the cost of raising capital.

The S&P analysts said that the trend toward megamergers has them reconsidering the way they will evaluate giant banks.

S&P now tends to rate holding companies, with that rating implied for their operating units. In future, however, S&P may boost the rating of the combined banks at the holding company level but give different ratings to various operating units, the analysts said.

That approach is in line with the direction financial regulation is now headed, with supervisors prepared to take independent action. "Regulators may be faster in the future to pull the trigger on an aberrant subsidiary," Mr. Rauch said.

The analysts focused on strains and setbacks that post-merger organizations are likely to encounter, including higher costs and customer departures because of service problems.

For instance, Bank of New York and Mellon Bank Corp. both have billions of dollars in custodial assets. "Diseconomies can creep in if an entity gets too large," Mr. Rauch said.

The S&P analysts also took issue with the notion of greater cross- selling opportunities touted by megamerger partners. "It's not that they need large size to do this," Ms. Azarchs said. "It's more a question of management integration and coordination" of efforts to sell people additional products.

A hard sell, moreover, could backfire and turn customers off, said S&P director Robert Swanton.

Indeed, the bigger the company, the higher the "overall risk of the customer becoming disaffected," Ms. Azarchs said.

People may depart over glitches in statements or a forced affiliation with an institution they shunned in the past, she said. "They may not want to do business with the company their bank is merging with."

Giant banks appear to have a better chance at succeeding if the economy remains robust. In the event of a downturn, finger-pointing could infect the board, as directors from one institution blame the merger partner for any troubles, the analysts said.

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