The proposed combination of Wells Fargo & Co. and Norwest Corp. will probably add fervor to dealmaking among the nation's shrinking roster of regional and superregional banks.
"Between now and the end of the year, the size and scope of mergers could be enormous," said Miles P.H. Seifert, a veteran New York money manager and bank stock investor.
"As deals get bigger and bigger, pressure on midsize and larger banks gets very onerous," he said. "Banks with $20 billion to $25 billion of assets now find themselves competing with giants."
Fleet Financial Group Inc., KeyCorp, PNC Bank Corp., Wachovia Corp., SunTrust Banks Inc., and not least U.S. Bancorp, could all be involved in transactions, according to analysts and portfolio managers.
Rich prices will probably be paid in some cases, but minimal-premium mergers of equals such as the one planned by Wells Fargo and Norwest will almost certainly be seen again.
Mergers of equals do not instantly excite Wall Street-bank stocks were up modestly in line with the market Monday. But "the more Norwest's deal is seen as a home run, the more it will be a model for others," said Stephen Berman of Stein Roe & Farnham, the Chicago investment advisory firm.
"There is certainly more to come," said Lawrence W. Cohn, research director at Ryan, Beck & Co., Livingston, N.J. "U.S. Bancorp probably wants to do a deal worse than ever; First Union likely wants to do something; and you wonder how long the New York banks can go before deciding they need a stronger domestic franchise."
Mr. Cohn said he was referring to Chase Manhattan Corp. and Citicorp. Inside the United States, both of these banking companies operate predominantly within the New York metropolitan area. "The longer they let consolidation go without taking part, the fewer their options," he said.
"Chase may have to do something," said Mr. Seifert, chief investment officer at Gray, Seifert & Co., a unit of Legg Mason Inc., Baltimore. But both Chase and First Union have sizable market capitalizations that would make a merger-of-equals transaction unlikely, Mr. Berman said.
Such mergers are more likely to involve Fleet or BankBoston Corp.- although not with each other. PNC or Mellon Bank Corp., both based in Pittsburgh, are possible partners, as is KeyCorp of Cleveland, said Mr. Berman.
Wachovia Corp., Winston-Salem, N.C. is a possible partner within this group "if they decide they wanted to be a northeastern bank," Mr. Seifert said. Much more likely is consideration of a merger with SunTrust Banks, Atlanta, "if cultural issues can be handled."
If the new BankAmerica Corp. wants to be a "truly national bank" after combining with NationsBank Corp., it has to consider a move to the Northeast, perhaps buying Fleet, Mr. Seifert said.
As for U.S. Bancorp, surely disappointed that Wells Fargo is betrothed to its Minneapolis rival, possible future partners might include Mercantile Bancorp. of St. Louis, KeyCorp-a less likely possibility-or National City Corp., Cleveland, Mr. Seifert said.
"Mercantile is a possibility, and I'm sure U.S. Bancorp would like to do Firstar Corp. (Milwaukee), but Wells Fargo was no doubt their first strategic choice," Mr. Berman said.
U.S. Bancorp, formerly First Bank System, is due to complete all conversions and integrations from its merger with the former U.S. Bancorp, Portland, Ore., this month and will be getting full cost savings from the deal during the second half of this year, he said.
"If there is some deal that fits their strategic plan and also pencils out financially, then they are certainly able to make an announcement," Mr. Berman said.