The Next Deal Could Be Biggest Bank Merger Of All Nations Bank, Bankamerica Reportedly Enter Into Talks

In the latest and potentially grandest U.S. bank marriage, NationsBank Corp. and BankAmerica Corp. are said to be discussing a merger that would land them at the top of the banking heap with $412 billion in assets.

If consummated, the marriage would put a U.S. institution in the world’s top 10 banks for the first time in years.

The merged bank would rank ninth in the world, and No. 1 in the United States, acing out the planned merger of Chemical Banking Corp. and Chase Manhattan Corp., which would create a bank with $297 billion in assets. It also would dwarf what currently is the nation’s largest bank, New York-based Citicorp., with $257 billion in assets.

The Los Angeles Times and Barron’s magazine, quoting unnamed sources, reported Monday that San Francisco-based BankAmerica and Charlotte, N.C.-based NationsBank have been discussing a merger. BankAmerica is the parent company of Seafirst Bank.

One NationsBank director told Barrons his institution has talked with several potential partners, but BankAmerica would make the best fit.

BankAmerica sources told the Times there is no guarantee of a deal. The bank has recently come close to closing other major deals that eventually fell apart.

Spokesmen at both banks declined to comment.

The rumors received mixed reaction from bank analysts, but investors warmed to the idea and bid up the stock of both companies. Presumably, investors figured their stock would be worth more if the two banks do a deal. BankAmerica rose $1.50 to $64.12-1/2 and NationsBank rose 75 cents to $70.75 a share on the New York Stock Exchange.

Giant bank mergers have become commonplace, as banks scramble to team up so they can increase market share and compete with nonbanks such as AT&T and Charles Schwab, which offer credit cards and other bank-like products.

New interstate banking laws and rising prices of bank stocks are also factors driving the deals.

But many recent bank mergers involve institutions operating in the same or neighboring markets, which allows the new bank to save money by cutting overlapping staff and branches.

A merger between BankAmerica, the nation’s second largest bank, and NationsBank, the third largest U.S. bank, would combine banks on opposite coasts and create a nationwide network of branches with little overlap.

As such, the combined bank couldn’t cut expenses through closing branches. That turned many bank analysts against the deal because they like mergers that will create banks with lower costs.

Instead, the combination would create a behemoth that would be difficult to manage and expensive to run, they said.