Despite Merger Frenzy, Americans Should Still Have Plenty Of Banks

The recent wave of consolidation among banks means fewer financial institutions. But even the current merger mania won’t put much of a dent in the nation’s vast banking industry.

With some 11,000 commercial and savings banks, 58,000 bank branches, 12,600 credit unions and 100,000 automatic teller machines around the country, there’s no shortage of banking options for Americans.

“Just like you have huge national grocery store chains and lots of small supermarkets around the corner from where you live, we’ll have big national banks and lots of community banks,” said George J. Benston, professor of finance at Emory Business School in Atlanta.

Banks are merging because the outlook for earnings growth is cloudy, thanks to intense competition from other banks and from companies like AT&T and General Motors Co., which steal credit card customers.

It’s easier and more profitable for banks to garner customers by buying another bank than it is for them to compete on their own. Plus, new laws that make it cheaper for banks to operate branches in multiple states has also added to banks’ urge to merge.

On Monday, Banc One Corp., the nation’s eighth largest bank, made a bid for the Bank of Boston Corp, only to withdraw it hours later. Banc One did not offer a reason, but hinted it would make another try.

The Columbus, Ohio-based Banc One said the desire to get New England customers was key to its interest in acquiring Bank of Boston.

The number of commercial and national savings banks has shrunk to 11,266 last year from 15,496 in 1984, according to the Federal Reserve Board. Mergers and acquisitions account for much of the shrinkage, although more than 1,500 banks failed during the same time frame.

But while the number of banks has fallen, the number of bank branches and ATMs has grown, suggesting that access to convenient banking facilities is getting better, not worse.

The number of branches and other banking offices has grown to 58,855 in 1994 from 44,018 10 years ago, according to the Fed. ATMs have grown exponentially, with less than 2,000 in 1973 and nearly 100,000 today.

U.S. laws barred nationwide banking until about 20 years ago, when states began allowing out-of-state banks into their turf. A federal law that takes effect Sept. 29 allows all banks to branch nationwide.

That will lead to further consolidation. What’s likely to occur is that medium-sized banks - those with between $5 billion and $50 billion - will disappear. That will leave a few dozen huge regional banks with $100 million or more in assets and nationwide branch networks, and hundreds of tiny community banks.