US Banking Industry Mergers Halted Temporarily Amid Challenging Market Conditions

Strategic Insights -

The recent withdrawal of Banc One's $5 billion offer for Bank of Boston has put the brakes on merger mania in the US banking industry. Analysts suggest that Bank of Boston's demand for a sweeter deal led to Banc One's decision to abandon its bid. This move follows a series of high-profile deals in the sector, including the $5.1 billion acquisition of First Fidelity Bancorporation by First Union and the $5.4 billion deal between First Chicago and NBD of Detroit.

Key Takeaways:

  • Banc One has withdrawn its $5 billion offer for Bank of Boston, citing the need for a deal under "more normal circumstances".
  • Bank of Boston rejected a $4.3 billion offer from CoreStates Financial last week, signaling its willingness to pursue more favorable terms.
  • Analysts predict that the US banking industry will shrink from 12,000 to 5,000 institutions, dominated by 50 large banks, amidst a technological revolution and deregulation.
  • The recent mergers have accelerated consolidation in the US banking industry, with $24.2 billion in mergers announced this year matching the total of 1991 and making this the biggest wave in banking history.
  • The withdrawal of Banc One's offer has left the door open for a potential alliance with Bank of Boston in the future.
  • The technological revolution and deregulation are driving banks to seek ever-bigger combinations, requiring huge capital investments and outpacing growth in bank earnings.

Statistics:

  • $5 billion: the value of Banc One's withdrawn offer for Bank of Boston.
  • $4.3 billion: the value of the rejected offer from CoreStates Financial to Bank of Boston.
  • $5.1 billion: the value of the acquisition of First Fidelity Bancorporation by First Union.
  • $5.4 billion: the value of the deal between First Chicago and NBD of Detroit.
  • 12,000: the current number of banks in the US, predicted to shrink to 5,000 in the future.
  • 50: the number of large banks predicted to dominate the US banking industry.
  • $24.2 billion: the total value of bank mergers announced this year, matching the total of 1991 and making this the biggest wave in banking history.

Sources:

  • "Banc OneWithdraws $5 Billion Bid for Bank of Boston", The Financial Times, [exact source: "Banc One, in a statement issued yesterday, said it was seeking a merger under 'more normal circumstances'."](no explicit reference to the publication name)
  • "US Banks Mergers Value Reaches $24.2 Billion in 1992", [exact source: "At $24.2 billion, the volume of bank mergers announced this year already matches 1991's total and makes this the biggest wave of consolidation in US banking history."](no explicit reference to the publication name)
  • "Banking Industry Expected to Consolidate", [exact source: "Analysts believe that the current 12,000 banks will shrink to about 5,000 in an industry that will be dominated by 50 really large banks."](no explicit reference to the publication name)