What `king of the hill' bank mergers mean for customers

Your local branch bank may look the same the next time you go in to cash a check, apply for a loan, or open a savings account. But in the plush executive offices, some fast scrambling may be going on. The talk there is likely to be of bank mergers. Big banks are getting bigger. The race to merge is on.

A growing number of big banks in the Southeast and Northeast are planning mergers. Two more merger plans were announced this week, involving banks in Georgia, North Carolina, and Florida.

And a United States Supreme Court ruling last week approving regional banking laws gives what a spokesman for the American Bankers Association calls ``a green light'' for more bank mergers.

At least five other major bank-merger plans were pending before the Supreme Court decision.

Will the average customer be better or worse off because of the mergers?

Bank mergers and acquisitions may benefit customers, says Dave Whitehead, an economist with the Federal Reserve in Atlanta. In Florida, after statewide mergers took place, ``the consumer got a better deal,'' he says. Interest rates on loans dropped, and interest rates paid on savings increased, as the expanding banks competed with local banks, he explained.

If you are currently dealing with a relatively small bank, it is likely that your bank would continue -- even if a branch of a merged, interstate bank came into town, says Stephen Rhoades, an economist with the Federal Reserve in Washington. For example, when big banks from New York City expanded to upstate New York, ``they did not have any dramatic success,'' he says. And the local banks ``survived just fine.''

Others are less sanguine. ``Without some safeguards, I see these mergers as having no real benefit for the consumers,'' says Steve Shevick, aide to Rep. Charles E. Schumer (D) of New York, a member of the House Banking Committee.

One safeguard approved recently by the committee in pending legislation requires the banks to tell the public how much money the banks are reinvesting in the local community. One concern is that the banks might siphon off local funds for investment elsewhere, says Franci Livingston, a staff lawyer with Public Citizen, a public-interest lobby group.

The legislation would also require states now allowing interstate banking mergers and acquisitions with only some states to open it to all states in five years. That would open the door to full interstate banking, analysts say.

Why are the mergers occurring?

Mr. Rhoades suggests some mergers are aimed at forming banks too big to be bought out by the giant banks. Other mergers could be in the making to attract a handsome buyout offer from ``one of the big boys [banks],'' he says.

Just plain growth and a bigger chance for more profits are other likely reasons behind the mergers, says Robert Andersen, general counsel of the Banking Commission of North Carolina.

The mergers announced Monday were: Wachovia Corporation of Winston Salem, N.C., with First Atlanta Corporation of Atlanta; and First Union Corporation of Charlotte, N.C., with Atlantic Bancorp of Jacksonville, Fla. The Southeast and Northeast have been the most active in organizing interstate mergers.