(2 of 3)
With buyers like McColl bidding up their prices, bank stocks overall rose 50% in 1997, marking the third straight year in which the sector outperformed the rest of the market. Does that make new acquisitions too costly? "I suppose that depends," McColl drawls, "on how skilled you are at taking costs out of the new combined company." Last year saw a record 72 bank acquisitions valued at more than $100 million apiece. The big gulp: a $16.5 billion deal by First Union--McColl's crosstown Charlotte rival--to acquire Philadelphia-based CoreStates Financial. That topped McColl's $15.5 billion buyout of Barnett Banks in Florida.
But banks are not just snapping up one another at a time when even firms like Merrill Lynch can offer federally insured deposits. "I know people who do not have a checking account with a bank anymore. They just use their brokerage accounts," says Kevin Timmons, a senior banking analyst for the First Albany investment firm. A recent survey by McKinsey & Co. found that only 49% of Americans now view their bank as their primary financial institution, down from 59% in 1992.
To reverse such trends, banks acquired securities brokers at a record pace last year. McColl shelled out $1.2 billion for Montgomery Securities of San Francisco. "Today we do almost everything Merrill Lynch does," he says. "We compete with them in investment banking and the brokerage business." Would he like to own Merrill? "We could," he replies, "but it's not for sale, and we are not interested." Then he adds with an alligator grin, "But nothing is forever!"
Nothing, that is, but his fierce desire to win--and have fun doing it. McColl was famed for his success at poker when he was stationed at Camp Lejeune Marine base in North Carolina. More recently, he helped bring a National Football League team, the Carolina Panthers, to Charlotte. And he dramatically opened the new 60-story NationsBank headquarters in 1992 by having soldiers rappel down the building on ropes. (Local wags dubbed the structure the Taj McColl.) He went in the opposite direction on his 60th birthday, trekking up Kilimanjaro.
McColl's buyouts, like his climbs, have been strewn with rocks. After spending $9.6 billion for Boatmen's Bancshares in St. Louis, Mo., in January 1997, he waited barely a year to announce a $15.5 billion deal to buy Barnett. Then he backed away from a pledge to cut $450 million out of Barnett's costs this year because of difficulty digesting the earlier acquisition. Nonetheless, NationsBank is shedding 200 branches in Florida (including 124 that state regulators have ordered it to divest) and reducing the merged workforce from 30,000 to 22,000. Gleeful local rivals have launched an ad blitz that analysts say could persuade about 10% of Barnett's customers to switch their accounts.
Despite the rapid mergers of existing banks, more and more new ones are being launched. The number of applications for community bank charters has quadrupled, from 49 in 1994 to more than 200 last year, with much of the activity coming in states like Florida and California, where giant banks predominate. "The large banks just don't do a very good job of serving the niche that community banks have," says Bob Colvin, a banking expert for Sheshunoff Information Services.