Word: bankamerica
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...fair, McColl isn't the only one to have figured this out. The past month has been peppered with the kind of earthmoving financial deals that would have seemed impossible a decade ago. On the same day last week that the BankAmerica-NationsBank deal was announced, Banc One chairman John B. McCoy (who once mused that in the future the industry would have just five or six major banks) announced plans to merge his $116 billion bank with the much merged $115 billion First Chicago NBD Corp. All this came just a week after insurance and brokerage giant Travelers Group...
...sure enough, one of the selling points of these megadeals is the idea that smart software will reshape the relationship between banks and customers. In a nonstop tango of bits and bills, the computers at the new Citigroup or at BankAmerica will zip through accounts looking for better ways to make money for both you and the bank. And the banks will use that efficiency to lever into the most profitable parts of the financial world: investment banking, stock underwriting and insurance...
...forever. Average investors who are now pouring money into mutual funds and stocks will soon have access to hundreds of other investment options. Think of the world as a landscape of opportunity--everything from distressed Japanese real estate to Russian oil futures--marketed and packaged by giant banks like BankAmerica or by fund companies like Fidelity Investments and the Vanguard Group. "This is like the automobile's coming," says Sanford. "We'd always had transportation--people walked, eventually they rode donkeys--but the automobile was a break from everything that came before it. Risk management will do that to finance...
Consumers might find this terrifying, but the superbankers love it. Because their gigantic banks are "too large to fail," firms like the new BankAmerica and Citigroup will offer the safest possible havens for investors--safer, perhaps, than even government-printed money. In the end, what the semper financiers are after is not just new customers or new deposits but a kind of business immortality ensured by their gargantuan size and guaranteed by their killer technology. E-cash, wealth accounts and consumer derivatives will have made these firms as essential as cash itself once was. If business immortality can be purchased...
Still, the recent mergers of Citicorp with Travelers, NationsBank with BankAmerica, and Bank One with First Chicago show that the push for bigness remains intense. Just about everyone expects a handful of not-quite-ready-for-prime-time banks--Mellon Bank, Wells Fargo, Norwest, Fleet Financial and others--to be bought or to find partners themselves. Meanwhile, those same banks, and many middle-size ones too, sport prices inflated by speculation. Their high stock prices give them currency to shop for smaller prey of their own. Fertile deal territory, for sure...