BankAmerica Corp.'s agreement to buy Continental Bank for $1.9 billion creates possibilities for expansion in some pension and investment services, including money management, trust and custody and record keeping, experts say.
But officials for both banks say the deal is too fresh to know which types of services bank executives will work to build after the proposed merger is complete. The announced transfer of Bank of America employees to Chicago from San Francisco will not affect workers in it pension and investment services areas.
With little overlap of services offered between the two banks, industry consultants said there is less of a chance of cultural clashes than there might be in a merger of banks with similar business lines.
Industry consultants speculate each of the two banks appears to bring different strengths to the table. Chicago-based Continental has a relatively stronger institutional asset management capability, while BankAmerica, San Francisco, is relatively stronger on the retail side.
Continental manages about $2.1 billion in institutional tax-exempt assets; about $6 billion in institutional cash management; $1.9 billion in money market mutual funds; and about $5.4 billion in private banking assets.
Bank of America manages about $42 billion total: $18 billion through the Pacific Horizon family of mutual funds; $7 billion in tax-exempt separate accounts; $16 billion in U.S. private banking assets; and about $1 billion in non-U.S. private banking assets, according to Keith Wirtz, senior vice president and chief investment officer for Bank of America. Bank of America offers 18 different management styles, although it is focusing on just 10 of those currently, Mr. Wirtz said.
Merging the banks' mutual funds is likely to be one of the banks' executives first actions, given that Continental's funds are relatively small and new, said Dave Nadig, senior consultant for Cerulli Associates Inc., Boston.
In addition, Concord Holding Corp., New York, is administrator for both banks' funds, and could merge the funds "extremely efficiently," Mr. Nadig said.
A merging of the two banks' institutional money managers seems less likely. At a news conference announcing the deal, BankAmerica's chief executive, Richard M. Rosenberg, said there is "a lot of room" for multiple styles of money managers within a company, and cited United Asset Management as a successful example of that.
James Miller, managing director and chief investment officer for Continental, said in a telephone interview: "We're very excited" about the deal. It will result in "an unbelievable increase in our market potential," based on Continental's improved financial rating and BankAmerica's presence in the West, through its wholly owned subsidiary Bank of America.
Continental uses a quantitative approach for both its equity and fixed-income management, Mr. Miller said.
Bank of America sold off most of its money management operations in the 1980s, as did many other banks, and "basically got out of the institutional business," said Brad Hearsh, a first vice president for PaineWebber Inc., New York. "I'd like to believe that they'd like to get back in ... but I just don't know how aggressive they're going to be."
Regarding the trust and custody business, the two banks have not been viewed as being in the top tier of providers, experts say. Cerulli's Mr. Nadig said Continental spent a lot of money in the mid-1980s on trust-oriented services, and could bring some technological sophistication to Bank of America.
Bank of America was ranked ninth among master trust and custody providers, with $111 billion in master trust and custody assets as of Sept. 1, according to the 1993 Pensions & Investments master trust/global custody survey. Continental's total in the survey was $24 billion, ranking it 17th.
In the same survey, Bank of America was ranked as the 10th largest global custodian with $4.2 billion in assets, while Continental was ranked 20th, with $400 million assets.
Michael Costa, principal of master trust consultants MLC Associates, Putnam Valley, N.Y., said the banks haven't "been major players for years."
Mr. Costa said that even before the merger agreement was announced, he wasn't sure what the level of Bank of America's commitment to master trust and custody was. Despite their top 10 asset ranking, "when you think of the top 10 banks in employee benefits, you don't think Bank of America," he said. Bank of America is "obviously doing a good job" of keeping its master trust and custody assets, Mr. Costa said, but "you just don't run up against them" in the competition for new assets.
Despite all that, Mr. Costa said he sees "a lot of possibilities, a lot of opportunities" resulting from the merger, should bank executives decide to make a push in trust and custody.
The outlook for the merged company's position in the defined contribution record-keeping market is similar to its outlook in master trust and custody. To this point, neither bank has played a major role - Continental got out of the retirement services business a few years back - but the merger creates an opportunity for some expansion in that area.
Mark Kordonsky, managing consultant in the Los Angeles office of A. Foster Higgins & Co. Inc., Princeton, N.J., said that following the merger, Bank of America would have a whole new list of clients to call on, but that is assuming the banks' executives want to move in that direction.
