When I look at some of the big bank mergers this year, it seems they are being driven more by short-term expediency than by long-term strategic vision. Does a bank need to be big to survive? You can find brawlers on both sides of that fight, but the evidence is inconclusive. Banks are only now beginning to truly experiment with scale across all of their permissible activities, and I'm not sure if anyone really knows whether the advantages of owning a nationwide branch network-and that's what we're really talking about here-will justify the cost.

With $266 billion in assets, Citicorp is a pretty big bank. And in the second quarter of this year, according to the calculations of Keefe, Bruyette & Woods, only seven of the 50 largest banks had a better ROE. But is this a logical consequence of being big? Citi does understand the value of scale: It has the largest credit card portfolio in the world and isn't afraid to throw its weight around. But I tend to think of Citicorp's size as a by-product of running a global company rather than its raison d'etre. And I think its strong performance results from pursuing a unified strategy in a number of wonderful markets rather than size per se.

The most serious challenge in banking today seems to be revenue growth. At the risk of over-simplification, banks can adopt one of two strategies: dig deeper into their own customer base to expand their share of wallet, or merge with a neighbor. The smart thing might be to pursue both options at the same time, but doing a deal is a quicker solution to the revenue problem, and it can have dramatic effect on earnings when you combine two revenue streams while cutting costs by a third or more. The only problem is that if you never learn how to grow revenues indigenously, then you need to keep doing deals.

The merger of Chase Manhattan Corp. and Chemical Banking Corp., which will outrank Citi as the largest U.S. bank, is a case in point. Analysts have generally been supportive of the deal. The two Manhattan-based money centers intend to cut more than $1 billion out of their combined overhead, and will have powerful market share positions in many of their retail and wholesale businesses. But once this enormous undertaking has been completed, will Chase and Chemical do a better job of growing revenues together than they had been doing separately? That remains to be seen, but it's my prejudice that the revenue challenges will remain-only they will exist on a vastly larger scale.

Recently the long-rumored affaire d'amour between NationsBank Corp. CEO Hugh McColl and Dick Rosenberg, his counterpart at BankAmerica Corp., was in the news again. I have a hard time understanding the logic of this potential pairing. Other than creating the largest bank in the country, and inflating McColl's and Rosenberg's egos, I'm not sure what this deal would accomplish. Proponents say a merger would assist both parties in "defraying the costs of technology investments," as a recent article in The Wall Street Journal put it, but I'd like to know how expensive it will be to put a $420-billion-asset, coast-to-coast branch network on common systems with a state-of-the-art database marketing capability.

My gut tells me that NationsBank and BankAmerica will do a deal when pigs grow wings and fly-but hey, I never thought Chemical and Chase would merge, either. And more than a few unexpected deals have taken flight this summer.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.