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Spurring more bank mergers { October 27 2003 } Original Source Link: (May no longer be active)    http://www.signonsandiego.com/news/business/20031027-0734-financial-fleet-competitors.html http://www.signonsandiego.com/news/business/20031027-0734-financial-fleet-competitors.html BankofAmerica deal seen spurring more bank mergers By Greg Cresci REUTERS 7:34 a.m. October 27, 2003 NEW YORK – The announcement Monday of a blockbuster merger between Bank of America Corp. and FleetBoston Financial Corp. to create the No. 2 U.S. bank is likely to spark a round of high-stakes buyout activity by industry kingpin Citigroup Inc. and other major players, money managers said. Bank of America's move to acquire Boston-based Fleet for close to $47 billion in stock marks the biggest U.S. bank merger since a frenzy of deals in 1998. When completed, it will catapult North Carolina-based Bank of America beyond J.P. Morgan Chase & Co. and give rise to a powerhouse with roughly $930 billion in assets, second only to Citigroup. "I'm sure that Citi is looking at the map more than ever now that Fleet, one of the often-rumored chess pieces, has been taken off the table," said James McGlynn, manager of the $50 million Summit Apex Everest Fund in Cincinnati. "Citi will have to get its market share map out and see who's left." Gerard Cassidy, a bank analyst at RBC Capital Markets, said the likeliest targets include well-known regional names such as Cleveland-based Keycorp , Pittsburgh-based PNC Financial Services Group Inc. and Mellon Financial Corp., also based in Pittsburgh. "Today's transaction is going to be a catalyst for other large transactions over the next six months," Cassidy said. "If Citi and other large players have aspirations of being a dominant consumer bank in the U.S., then they need to look hard at the big franchises that are available." Shares of Keycorp gained 4.9 percent to $28.19 on the New York Stock Exchange, after earlier hitting a four-year high of $28.72. PNC jumped 5.5 percent to $53.60, after touching a 16-month high of $54.30, and shares of Mellon rose 1.8 percent to $30.06. Citigroup spokeswoman Leah Johnson was not immediately available for comment about possible future acquisitions. New York-based Citigroup agreed in May to buy West Coast thrift Golden State Bancorp for $5.8 billion in cash and stock, expanding its already vast consumer franchise. CONSOLIDATION SEEN IN BANKS With some 9,000 banks scattered across the country, mergers are seen by analysts as a long-term path toward rationalizing an over-serviced sector. But the majority of those banks are relatively small, lacking the necessary scale to give banks like Citigroup added heft. "Bank CEO's in general look out 5-10 years when they do these transactions," Cassidy said. "So, if you're Citi, do you want to bother with banks of $2 billion in size, when you're looking for hundreds of billions of dollars in deposits and assets? Why not go after a very large franchise that gives you that?" The Standard and Poor's Bank index, comprised of 30 U.S. banks, has risen 16.5 percent since the beginning of the year, in line with the increase for the benchmark S&P 500 index . "The Bank of America/Fleet deal is very telling because it shows that the banks, which are basically the cardiovascular (system) of the U.S. economy, are feeling good about their prospects," said David Katz, chief investment officer at Matrix Asset Advisors Inc., which oversees about $950 million and owns shares of both FleetBoston and Bank of America. "There's a pretty good likelihood that more players will start to look at various and sundry things."

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