Three Big Bank Deals To Close _ It’s Not April Fools
NEW YORK (AP) _ Customers of Chemical, First Interstate, Bank of Tokyo and Mitsubishi Bank will likely have to learn some new names to find their money Monday. It won’t be an April Fools’ gag, either.
Three huge bank mergers are set to be completed Sunday and Monday, April 1, creating new leaders in world and U.S. banking. For those who track such things, the deals together are worth about $60 billion and involve assets of more than $1 trillion.
What does that all mean for customers of the combining banks? It depends on whom you ask.
Community activists worry branch closures resulting from the mergers will cost jobs and deny some low-income communities access to capital. The banks argue they’ll be able to deliver better, more efficient service.
``If you’re a customer, you’ll probably see a new name on your checks and credit cards and so forth,″ said Raphael Soifer, a banking analyst at the brokerage firm Brown Brothers Harriman & Co.
``I don’t really see any big changes in the marketplace itself that consumers will see,″ he continued. ``It doesn’t really take capacity out of the market, it just takes some branches out. But my guess is they would have gone out anyway.″
For bank workers, it’s another story altogether.
The merger of Chemical Banking Corp. and Chase Manhattan Corp., creating the nation’s biggest bank, will cost 12,000 jobs. Wells Fargo & Co.’s purchase of First Interstate Bancorp will eliminate up to 10,000 positions, analysts estimate, though the bank hasn’t provided a tally.
Mitsubishi Bank Ltd.‘s merger with Bank of Tokyo Ltd., which will form the world’s biggest bank, will bring an unspecified number of jobs cuts at least to the two banks’ California subsidiaries _ though they’re expected to be far less severe than the other banks’ cutbacks.
``The two American ones, both of them are mergers driven by cost-cutting, massive branch closings and layoffs,″ said Matthew Lee, executive director of Inner City Press/Community on the Move, a community organization based in New York City.
``As far as we’re concerned, it’s very difficult to say it’s a good thing,″ Lee continued. ``In fact, it’s not.″
The first thing customers will need to get straight are the banks’ new names. Chemical and Chase will take the Chase Manhattan name. First Interstate will become part of Wells Fargo. Bank of Tokyo and Mitsubishi will become Bank of Tokyo-Mitsubishi Ltd.
Investors will need to sort it out, too. Standard & Poor’s Corp. says after the close of trading Friday it will eliminate First Interstate from its S&P 500 index. It will begin counting Chemical shares as the new Chase Manhattan, and drop the old Chase issue.
Bank mergers have become something of a common occurrence in corporate America these days, driven partly by new technologies that allow banks to process more checks, handle more accounts and keep track of more customers with greater ease than ever before.
``Part of it is the technology permits this. Part of it is the marketplace permits this,″ said Mike Moran, a partner at the accounting and consulting firm KPMG Peat Marwick who specializes in banking.
The new environment gives bank mergers the double advantage of providing greater assets _ more money to loan out and otherwise invest _ and the ability to handle combined operations with fewer people and facilities than the banks could have done standing alone.
That helps them compete against brokerage firms and other companies, such as General Motors and AT&T, that are moving into traditional banking businesses like credit cards, loans and even checking accounts.
The Chase Manhattan-Chemical combination will create a powerhouse in the New York City area, where both banks are located, as well as a major global competitor. The deal, a stock swap worth $13.2 billion at current prices, is scheduled for completion on Sunday.
Lee’s group sought to block the merger’s consummation, arguing the 100-odd branch closures the banks plan will hurt some low-income areas. The effort was rejected Tuesday in court.
Mitsubishi’s merger with Bank of Tokyo is also a stock deal, valued currently at $34.1 billion and ranking as the biggest merger ever. The two Tokyo-based banks plan to compete their marriage Monday, creating a behemoth with about $800 billion in assets.
By contrast, the new Chase will have assets of about $300 billion and a post-merger Wells will total about one-third of that.
Wells Fargo’s purchase of First Interstate, a stock deal now worth $13.9 billion, is set to be completed Monday. First Interstate shareholders on Thursday overwhelmingly approved the merger, which will create a powerful California competitor and the nation’s No. 8 bank.
Wells shareholders were to vote later in the day and were expected to easily OK the deal.
One final hurdle to the marriage of San Francisco-based Wells and First Interstate in Los Angeles, an agreement to divest 61 branches as required by regulators, was announced early Thursday.