Bank merger seen helping rivals NCNB-Sovran giant may find economies elusive.


The immediate beneficiaries of the proposed merger between banking giants NCNB Corp. and C&S;/Sovran Corp. could be their smaller rivals, who may capitalize on the initial confusion that usually comes with such combinations.

"The bigger they get, the easier it gets" for small banks to compete, says Arnold G. Danielson, a banking consultant in Rockville. He also expects the operation of such a huge network, which will stretch from Maryland to Texas, to be "a challenge."

The new company, which will be called NationsBank, will be the third largest bank holding company in the country. It will have $118 billion in assets and about 1,900 branches in nine states.

The merger will be accomplished by an exchange of NCNB stock for Sovran stock in a deal valued at $4.3 billion.

On news of the proposed merger, NCNB stock yesterday dropped $2 a share and closed at $35 while Sovran rose by $1.50 to $27.37 1/2 a share.

NCNB, headquartered in Charlotte, N.C., is the nation's seventh largest bank, with assets of $65.3 billion. It has 900 branches in North Carolina, South Carolina, Florida, Georgia, Texas, Virginia and Maryland.

In Maryland, NCNB has seven branches in Baltimore and Baltimore County and about 160 employees, according to H. Lee Boatwright, president of the Maryland subsidiary, NCNB National Bank of Maryland.

C&S;/Sovran, based in Atlanta and Norfolk, Va., has $51.2 billion in assets, making it the nation's No. 12 bank. It has 1,000 branches in Virginia, Maryland, Tennessee, Kentucky, Georgia, South Carolina, Florida and Washington, D.C.

C&S;/Sovran spokeswoman Liz Curtis says the company has 2,083 employees and 85 branches in Maryland.

With most of C&S;/Sovran's Maryland branches in the Washington suburbs and NCNB primarily in the Baltimore region, there is not a great deal of overlap, according to Danielson. In fact, even though they operate in many of the same states, the two banks have pretty much stayed out of each other's areas, he says. This precludes cost cutting that could come from consolidating operations, Danielson says.

Danielson sees another problem in the sheer size of the combined bank. "You may have created a monster here that will be large enough to be overly bureaucratic, but does not have the overlap necessary to bring added economies of scale," he says.

David S. Penn, a banking analyst for Baltimore's Legg Mason Inc. stock brokerage firm, agrees that there might be initial opportunities

for smaller banks. But once the merger is completed, the new operation will be a formidable competitor, he says.

"NCNB is really good at this stuff," he says. "Hugh McColl [NCNB chairman and chief executive officer] is the type of guy that can make this work," Penn says.

Sandra J. Flannigan, a banking analyst for the Alex. Brown Inc. investment banking firm in Baltimore, expects to see expanding consumer services as the two operations combine their banking products. "They are still building their consumer franchise," she says. "Part of their business strategy is to become more in touch with consumers."

Both Boatwright and Curtis say they do not yet know how the merger will affect jobs or operations in Maryland at the two banks.

NCNB came to Maryland in 1986 when it acquired CentraBank of Baltimore, a mutual savings bank. In addition, NCNB has 17 workers in Rockville in a residential mortgage and corporate lending operation. Its administrative center is in downtown Baltimore.

Sovran moved into Maryland in 1986 when it acquired Suburban Bancorp of Bethesda, the state's fourth largest bank, in a stock swap valued at $405 million. Suburban had previously acquired Colonial Bank & Trust of Annapolis in 1973 and National City Bank of Baltimore in 1970.

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