HOUSTON — There was a time, not long ago, when Texas bankers used the missionary voice when talking about interstate banking. They would be the natural leaders of regional bank groupings, and they could bring the benefits of the Texas business climate to other, less fortunate states.
Today, when Texans talk of interstate banking, it is in the tone of the supplicant looking for salvation. Many banks say openly that they would welcome a capital infusion from out of state. They avoid the terms merger or acquisition because they are not eager to sell out. But they wonder these days if there is any alternative.
And that vulnerability means that some of the strongest U.S. banking companies from New York and California are soon to enjoy golden opportunities in the nation's third most populous state.
Adversity has shaken the Texas bankers, as it has most people here. In this city that saw more new office buildings--and more truly interesting architecture--rise in the last 10 years than in any other city, the building cranes are hushed. And so are the voices in the luncheon clubs, as business people explain why Houstonians are stunned.
From Bad to Worse
"Most people here never experienced an economic downturn," says a banker, alluding to the fact that from the mid-1960s, when Shell Oil started moving its headquarters here from New York, right up to 1982, when the oil industry downturn began, the economy of Houston--and that of virtually all of Texas--was in a strongly rising trend.
Since then it has gone from bad to worse, and the last seven months--when the price of oil has dropped so precipitously--have been terrible. With drastic reductions in revenue threatened, the Texas Legislature is meeting in special session in Austin to deal with a projected budget deficit of more than $3 billion, where the state used to record $3-billion surpluses.
That legislative session is also considering a bill that would permit out-of-state banks to acquire Texas banks and savings and loans. The bill is not a sure thing--many small, independent banks are opposed. But the state's bank holding companies support the bill, and fear of a banking crisis is strong enough in Austin that passage may come next week.
Strong Are Ready to Deal
If it does, interstate banking could come with an interesting twist in Texas. In most states, it has come like the proverbial camel's nose under the tent--a well-heeled national bank such as Citicorp being allowed by state regulators to rescue an ailing bank or S&L. For most of this year, conventional thinking saw it happening that way in Texas. Troubled banks such as Dallas' BancTexas Group or Houston's First City Bancorp were mentioned prominently as buyout candidates.
But out-of-state acquirers may not have to be satisfied with the troubled in Texas. Relatively strong bank holding companies are indicating a willingness to deal. Fort Worth's Texas American Bancshares, for example, has hired investment bankers Goldman, Sachs & Co. to represent it. Allied Bancshares of Houston has also indicated interest. And Texas Commerce Bancshares, one of the state's and the nation's largest bank companies, would not be averse to linking up with an out-of-state bank.
That is why on Wednesday, when the interstate bill was introduced in Austin, the stock prices of the stronger banks--including Dallas' RepublicBank Corp. and the above-mentioned three--rose more strongly than those believed to be in weaker shape.
The buyers are ready. Discussing prospects in Texas, an officer of Los Angeles' Security Pacific Corp. said recently that "it might make better sense to pay a premium and get a healthy bank than to look for a bargain and buy trouble."
The rub, of course, is defining healthy in an economy threatened with new bankruptcies. The 1986 oil price collapse has put loans to drilling rig companies--a major category for Texas banks--on the critical list.
Houston-based Peter Anker, who brokers offshore rigs for the Norwegian brokerage house of R. S. Platou A/S, says that rigs built for $45 million only four years ago could bring as little as $4 million in a sale today. Anker estimates that it will be 1988 before the rig market turns around, and he advises banks to ride out the current period with their customers.
Is intensive care on rig loans really an opportunity? Sure, if looking through the downturn you can see a state with 16.4 million people, ranking second in consumer spending behind California and third in bank deposits (with New York second)--a state, moreover, with tremendous capabilities in manufacturing and services and with an excellent university system in place.
Texans may be too stunned today to accentuate the positive as they always used to. But that shouldn't blind outsiders to the state's giant opportunities.