Community bankers will be looking at a whole new landscape in correspondent banking after the series of megamergers is consummated early next year.
The pending mergers will create 11 of the top 20 correspondent banks in the country, with four of the acquiring banks moving up significantly in average correspondent balances for the four quarters ended June 30, 1995, according to an American Banker ranking.
The consolidation also removes at least a half-dozen of the nation's leading correspondent banks, including second-ranked Chase Manhattan Corp., which is being bought by Chemical Bank Corp., the fourth-ranked provider.
But correspondent bankers said they didn't think the megamergers between the large service providers would reduce the number of options available for community bankers.
"I don't think it would be cause for concern for anybody at this point," said John Sampson, senior vice president of correspondent banking at Norwest Corp., Minneapolis, which actually dropped a notch to 14th nationally. "There's been overcapacity in correspondent banking, and you'd have to see a lot of large mergers before that would cause difficulty for community banks."
In fact, said Michael P. Heavener, executive vice president of CoreStates Financial Corp., Philadelphia, the consolidation among large correspondents can actually help them to play a greater role and offer more services as they grow.
The changes in the correspondent hierarchy reach right to the top. After four years as the leader among the nation's correspondent banks, San Francisco's BankAmerica Corp. will be surpassed in average demand deposits due all banks by the new Chase, which would have $3.1 billion in correspondent balances, compared with $2.7 billion for BankAmerica.
While there are still plenty of choices for community banks to obtain services, the surviving major entities will have to work pretty hard to keep their customers. Like retail and small-business customers, community bankers might switch providers because they don't like the upheaval and uncertainty surrounding mergers.
"There's usually a change in philosophy, a change in pricing techniques, a change in levels of service, a change in the commitment to correspondent banking," said Gayle M. Earls, president and chief executive of Texas Independent Bank, a bankers' bank that competes with the large banks for correspondent business. "It could be either better or worse, but we haven't seen many that have been better."
In fact, Mr. Earls said his bank has gained business from dissatisfied former large-bank customers.
"It can happen if you lose sight of your customers," said Mark P. Reinemann, first vice president of Firstar Bank in Milwaukee. "There's a real risk that, like a small business, a community bank could find itself lost in the shuffle as its correspondent bank gets larger and larger."
That's not necessarily as much of a problem when the merger already involves two large banks, since the correspondent customers are accustomed to dealing with a much larger entity and have "already made the decision that they would prefer one-stop shopping" at a bank with a wide array of services, Mr. Reinemann said.
"Community banks dealing with large banks are comfortable dealing with large banks," Mr. Sampson said. "When a large bank acquires a smaller one, there's always a challenge to retain the customers of the smaller one, because they've made a choice to be with a smaller one."