BankAmerica Corp., parent of Bank of America, has agreed to merge with NationsBank Corp. to create the nation's biggest and first true nationwide bank, with branches in 24 states, according to media reports Sunday.
The deal would form the world's biggest financial company, and along with other recently announced mergers would put added pressure on rivals, such as Wells Fargo in the West, to keep growing as well or risk being taken over.
Details were sketchy and the banks would not comment, but the deal would have to be worth at least $60 billion, the current market value of BankAmerica, which is based in San Francisco. NationsBank, based in Charlotte, N.C., is worth $73.5 billion, based on Thursday's closing prices. Investment banking sources said the deal would be officially announced today.
The merger would be the second largest ever, after last week's announcement that Citicorp would be merged in a $80-billion deal with Travelers Group Inc., combining the No. 2 U.S. bank with the fast-growing financial services company that last year bought Salomon Inc. But BankAmerica and NationsBank would not face the regulatory hurdles expected for the Citicorp-Travelers Group merger because the latter would combine bank operations with insurance and securities businesses.
The combined banks' assets would vault the company to No. 1 in the U.S., ahead of both Chase Manhattan Corp., the current leader, and Citicorp, the second-largest with or without the Travelers deal.
The weakest spots for NationsBank and BankAmerica would be in the Midwest and the Northeast. Chase, Citicorp, First Union Corp., Fleet Financial Group Inc. and BankBoston Corp. dominate the regions.
Until now, most bank mergers have involved institutions that competed against each other in the same markets. Those banks merged in part to reduce costs, such as excess branches, and eliminate competition. Now financial companies are aiming for geographic reach, which may not result in as many immediate cost savings. It's not clear, for example, if BankAmerica would cut jobs in California because NationsBank doesn't have a significant presence here.
As part of their expansion beyond traditional banking, both NationsBank and BankAmerica bought San Francisco-based investment banks in the last year. NationsBank owns Montgomery Securities, while BankAmerica purchased Robertson Stephens Inc., traditional rivals. There was no word on how the two might be operated.
NationsBank, which is set to report earnings today, has scheduled a meeting with analysts at the Waldorf Astoria in Manhattan later in the day.
Industry sources also said that NationsBank chief executive Hugh McColl was in San Francisco on Friday afternoon, fueling rumors that he was meeting with BankAmerica executives. He reportedly had no scheduled meetings with Montgomery Securities.
NationsBank has a history of making acquisitions over long holiday weekends.
Other rumors last week linked acquisitive First Union Corp., also based in Charlotte, N.C., with Wells Fargo and Co.
"Everybody's talking with everybody," one investment banker said.
Analysts said McColl has long expressed an interest in moving into California and that the Citicorp-Travelers Group Inc. deal might have added fuel to the fire.
"McColl has said the only hole in his franchise is in Southern California and that his interest in thrifts is less than zero," Merrill Lynch analyst Livia Asher said.
Giant Seattle-based thrift Washington Mutual Inc. just bought California's H.F. Ahmanson & Co., parent of Home Savings, creating a savings and loan superpower in California and leaving the several remaining smaller thrifts ripe for takeover.
But if McColl or any banking executive were considering entering the state via a merger with another bank, the choices include just BankAmerica Corp. or Wells Fargo, the state's two remaining huge banking centers.
The combination is expected to be run for about two years by McColl before BankAmerica's 50-year-old chairman and chief executive, David Coulter, takes over, according to media reports.
"The optimal size of the survivor has changed, and acquisitions are going to keep going," Asher said. Both NationsBank and First Union are determined to be among the dozen or so survivors of the industry's consolidation--the companies that will control the nation's banking assets, analysts said.
In another banking merger, sources in New York said Sunday that Banc One Corp. is expected to announce today plans to buy First Chicago NBD Corp. for about $30 billion in a deal that will bring together two powerful Midwest banks.
First Chicago shareholders would receive 1.62 shares in a new company, which would keep the Banc One Corp. name and would be based in Chicago, for every share they own, the New York Times reported. Banc One shareholders will get one share of the new company for every share they own.
Associated Press, Bloomberg News and Reuters contributed to this report.