Largest U.S. Bank to Form Through $60-Billion Merger

Strategic Insights -

The planned merger between NationsBank Corp. and BankAmerica Corp. will create the largest U.S. bank, with assets totaling $570 billion, spanning 22 states, and operating in 38 other countries. Under the terms of the agreement, BankAmerica investors will receive 1.1316 shares for each share they hold, while NationsBank shareholders will retain their stock. The merged bank is expected to reap $10 billion in annual profits, partly due to estimated cost savings of $900 million through the elimination of 8,000 jobs, representing about 4.4% of the combined workforce.

Key Takeaways:

  • The merger aims to create a truly national franchise with a strong market share in nine of the 10 largest and fastest-growing states.
  • The combined bank will have assets of $570 billion, branches in 22 states, and operations in 38 other countries, making it the largest U.S. bank.
  • BankAmerica investors will receive 1.1316 shares for each share they hold, while NationsBank shareholders will retain their stock.
  • The merged bank expects to realize $10 billion in annual profits, largely due to estimated cost savings of $900 million through the consolidation of jobs.
  • NationsBank chairman Hugh McColl and BankAmerica chairman David Coulter expect to maintain their leadership positions, with Mr. Coulter becoming president and eventually succeeding Mr. McColl, who will assume the role of chairman and chief executive officer.
  • The bank expects to cut 5,000 to 8,000 jobs, reducing annual costs by $2 billion.
  • The merged bank's earnings are forecast to grow by 18% in 1999.
  • The wave of mergers in the banking industry has led to a frenzy of consolidation, with several banks agreeing to buy or merge with other companies.

Statistics:

  • Estimated pre-tax merger cost savings: $900 million
  • Expected annual profit growth: 18% in 1999
  • Projected number of jobs to be cut: 5,000 to 8,000
  • Total assets of the combined bank: $570 billion
  • Branches in 22 states
  • Operations in 38 other countries
  • BankAmerica's share price rose by 55% over the past three years, outperforming its rivals

Sources:

  • Associated Press
  • BusinessWeek
  • The New York Times
  • The Wall Street Journal
  • Chronicle of Higher Education