Banking & Finance
Rising competition get bankers' creative juices flowing
San Francisco Business Times - by Mark Calvey
While the headlines trumpet industry consolidation and the long list of failed institutions that deregulation has spawned, greater freedom to compete has also led bankers to create a plethora of innovative products.
Among the latest examples of such offerings is Glendale Federal Bank's announcement this month that it will expand its all-in-one Infinity checking account to include same-day sweep of excess funds in and out of uninsured money market funds. The accounts are typically offered to wealthy customers but have been largely out of the reach of the middle class.
"This is a revolutionary addition to our Infinity checking product that will bring cash management to the underserved middle America customer," said Stephen Trafton, Glendale's chairman and CEO. "Bank and brokerage firms have typically overlooked this group in pursuit of higher net-worth customers."
The Infinity account's new sweep feature allows for automatic investment of excess funds into a taxable or tax-exempt money market fund account and the transfer back into the checking account to maintain a predetermined amount of cash in the account or to cover overdrafts.
If Glendale's improved Infinity account proves successful, it will be interesting to see how competitors respond.
Another interesting mortgage product comes from one of the banking industry's biggest competitors under deregulation -- Merrill Lynch & Co. The brokerage has launched a mortgage program that does away with a home buyer having to choose between a real estate purchase and his securities portfolio.
Merrill Lynch's Mortgage 100 will finance the full purchase price of a house by securing the mortgage with both the real estate and your stock portfolio. So the 20 percent down payment of $20,000 on a home purchased for $100,000 -- obviously, not a Bay Area house -- could be financed by pledging a portfolio of stocks, bonds and mutual funds worth $39,000. The brokerage adds the buffer in an effort to avoid a margin call.
"Historically, a lot of people have sold securities and paid capital gains taxes to buy their homes," said Merrill Lynch spokeswoman Wendell Wood Collins. "Mortgage 100 allows you to keep your money working for you in the market."
BankAmerica won't play follow the leader
Some wondered whether BankAmerica would enter the blockbuster merger arena when NationsBank rocked the banking world last month by announcing it will buy Florida's Barnett Banks.
But comments this month from BankAmerica's top executives to Wall Street and the trade press suggest the bank is staying the course.
That's exactly what Wall Street wants to hear.
"We believe BankAmerica will maintain the strategy that has helped the stock appreciate more than 45 percent year to date," according to a report issued Sept. 16 by Smith Barney. "That means focusing on the core businesses, improving returns on invested capital and shedding those parts of the company that do not fit."
While avoiding blockbuster mergers that would expand its geographic reach, BankAmerica has been far from idle. The bank has focused on bolstering its more profitable product lines with the recent acquisitions of Honolulu Mortgage Co., San Francisco's Robertson, Stephens & Co. and Ford Motor Co.'s leasing portfolio.
BankAmerica would be "keenly interested in talking to anyone else" about buying leasing portfolios, Michael O'Neill, vice chairman and chief financial officer at BankAmerica, told American Banker.
NationsBank considers the value of thrift
NationsBank CEO Hugh McColl Jr. is telling Wall Street that he might consider entering the Golden State via a thrift acquisition.
Such a move a would be out of character for the PacMan of banking who usually likes to swallow banks holding dominant franchises.
"McColl stated clearly that given what's available and how much it would cost, it's very conceivable that NationsBank never enters California," said Ruschi Madan, an analyst with PaineWebber who recently met with McColl. "He also seemed to be softening his view of entering California through a thrift acquisition, given the lack of entry points to California."
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