Banc One stalks big game, profitable customers

NEW YORK -- Banc One Corp. is on the hunt for a big acquisition, as long as it brings a slew of profitable customers, the Ohio bank's top merger expert said.

After sitting out a wave of mega-mergers that swept U.S. banking since last year, Banc One, the nation's 10th-largest bank, is prepared to look at its first major acquisition in years.

"We are now clearly in a position to look at any opportunity that comes along," said William Boardman, senior vice president of acquisitions. Analysts and investment bankers speculate Columbus, Ohio-based Banc One was in the running to buy Boatmen's Bancshares Inc. of St. Louis last month, only to lose out to NationsBank Corp.'s roughly $9 billion bid. Although Boardman stopped short of confirming the speculation, he lamented in a speech to a conference on bank mergers that Boatmen's "would have been a nice augmentation to our company." Wall Street has long viewed Banc One Chief Executive John McCoy as likely to join big banks that participated in a record $66 billion in mergers last year. Aside from a $5 billion bid for Bank of Boston Corp. last year that was quickly withdrawn, Banc One stayed out of the multi-billion mergers that occupied many of its peers. Banc One's biggest acquisition in the last two years was the purchase of Premier Bancorp in Louisiana for $800 million. Now would be a good time to start looking at a big acquisition, Boardman said. Banc One entered the Oklahoma City market in late 1993 when it purchased Central Bank and Friendly Bank. The two banks later were merged into Bank One Oklahoma. The excess capacity of some $450 million in investments in new computer systems in the past few years makes it easier than ever to track and boost the profitability of new customers taken on in a merger, Boardman said. And by next year, a reorganization called Project One will be complete, where Banc One is cutting costs by turning dozens of local and regional banking units into 12 statewide units and by merging duplicate processing operations. "It would be nice to have a significant acquisition that falls into place when Project One is done," Boardman said. Until now, McCoy has publicly justified sitting on the acquisition sidelines. In May, he told Bloomberg Business News that bank asking prices are too high, and the bank won't make "dumb" purchases that will hurt earnings. Boardman said Banc One still isn't willing to pay up for a bank that doesn't meet a principal criteria: delivering a big enough group of profitable customers to justify its price tag. The profitability of a bank's customers is one of Boardman's top priorities when he looks closely at a potential acquisition. As much as buying a bank, with deposits, loans and a network of branches, Boardman said Banc One shops for retail banking customers that are profitable prospects for the bank's sales machine -- customers who will use many of the bank's services. "We are interested in acquiring banks with the same kind of customers as ours," he said. The bank makes the most money off customers who not only maintain checking accounts, but use their bank to make loans, buy mutual funds, trade stocks, or park money in trust accounts that generate profitable investment fees. Banc One has long been known as an acquisitive bank, its growth fueled by 100 purchases since 1968. The company now has 1,500 banking offices in 12 states, mainly in the Midwest and South. Analysts say Banc One can afford to wait on making a big acquisition. A cost-cutting plan, coupled with the Project One reorganization and plans to expand consumer finance and other national businesses, is expected to add $1.2 billion to annual profits by 1999. Last year, profits jumped 27 percent to $1.28 billion, and Banc One shares are up 25 percent in the past year, compared with a 15 percent rise in the Standard & Poor's 500 Index. "We have never been in a position of having to do an acquisition and we aren't now," Boardman said.

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