WATCH FOR MORE BANK MERGERS
MUNCIE, Ind. -- America's banking industry is shrinking and may get even smaller due to further consolidation, says a Ball State University financial industry expert.
Further consolidation will occur due to mergers of not only the larger institutions but also of small- and medium-sized banks, says Kris Mantripragada, a finance professor.
"Although the current heightened attention to bank mergers is due to the sheer size of the merging institutions, consolidation is nothing new," he said. "In fact, it has been going on for more than 10 years. In the 1980s, we had about 14,000 banks and today we have about 9,000.
"Over the years, we've seen large banks buy other large banks, banking chains spreading across state lines, and even small community banks seeking mergers with similar-sized operations."
An important cause of recent bank mergers is the spectacular rise in the bank stock prices, making it easier to pay the price for the acquired institution, Mantripragada said.
The average person should not worry about the loss of popular services, higher interest rates or related issues. Popular and profitable services will remain, although customers may be charged more, he said.
One of the advantages to the megabanks is their ability to better handle larger loans as compared to the small community banks or medium-sized regional operations. Another asset is the larger operations' ability to make the necessary investments in technology, Mantripragada said.
Small banks are not doomed. They will survive because many are not large enough to be attractive to the larger banking chains, he said.
"Most small banks will continue by finding their niche and by offering good customer service, lower fees and neighborhood convenience," Mantripragada said.
- 30 - (NOTE TO EDITORS: For more information, contact Mantripragada at (765) 285-5200.) M. Ransford 6-1-97
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