BankAmerica and Nationsbank Rumored Merger Resurfaces Amidst Banking Consolidation

Strategic Insights -

In the rapidly evolving banking landscape, the rumor of a potential merger between BankAmerica Corporation and Nationsbank has resurfaced. Sources close to both institutions confirm that negotiations have taken place, but no new talks are currently underway. BankAmerica shares rose $1.50 to $64.125, while Nationsbank shares increased 75 cents to $70.75, suggesting market support for the speculative combination.

Key Takeaways:

  • A prospective merger between BankAmerica and Nationsbank, two of the country's largest banks, has been the subject of speculative articles and market activity.
  • People familiar with both banks confirm that there have been negotiations, but none are currently ongoing.
  • A deal would create the nation's largest bank, with a combined market presence spanning the South and West from Seattle to Miami.
  • BankAmerica officials were intrigued by the potential of avoiding expensive acquisitions by merging with Nationsbank as "equals," exchanging shares at their current market price.
  • Analysts estimate that a well-done merger could cut office and headquarters costs by approximately 10 percent.
  • The merger talks stalled on topics such as name, headquarter city, and broader issues about which institution would dominate the resulting combination.

Richard Rosenberg, BankAmerica's chief executive, approached Hugh McColl Jr., the chairman of Nationsbank, to discuss a merger in the spring, but the talks ended inconclusively. The decline of branches' value due to electronic banking and the issue of who will be chief executive are significant hurdles in such talks. Analysts suggest that a merger might be more feasible now, given the potential risks associated with Wells Fargo's hostile bid for First Interstate Bancorp.

Statistics:

  • BankAmerica shares rose $1.50 to $64.125.
  • Nationsbank shares increased 75 cents to $70.75.
  • Analysts estimate that a ten percent reduction in office and headquarters costs is possible following a merger.
  • BankAmerica's price-to-earnings ratio is 10.2 to 1.
  • Nationsbank's price-to-earnings ratio is 10.4 to 1, below the average of 11.3 to 1 for large banks.

Sources:

  • "Barron's"
  • "The Los Angeles Times"
  • People familiar with both banks (no names cited)
  • Analyst David S. Berry, Keefe Bruyette & Woods (note that names and organizations are cited exactly as in the original text)