B of A Left as Top Contender for Failed Bank

Banc One, citing uncertainty in the New England economy, said Tuesday that it is dropping out of the bidding for the failed Bank of New England.

The decision leaves San Francisco-based BankAmerica Corp. as the top contender to buy the bank, many bankers and analysts believe.

A BankAmerica spokesman said the decision by Columbus, Ohio-based Banc One does not affect its plans, adding that it still intends to submit a bid to the Federal Deposit Insurance Corp., subject to various conditions that the bank has yet to specify.

Banc One’s decision deals a blow to efforts by regulators to sell Boston-based Bank of New England. Banc One is one of the nation’s strongest banks, and its dropping out makes the bidding much less competitive.

Bids are due Friday. In addition to BankAmerica’s bid, other potential bidders who have reviewed the bank’s books are Fleet/Norstar Financial in Rhode Island, the New York investment firm Kohlberg Kravis Roberts & Co. and Bank of Boston, which would need to raise capital to make a bid.

BankAmerica has previously said any purchase will require substantial government assistance and be subject to approval by its directors. Many bankers believe that BankAmerica can have Bank of New England if it wants it. They contend that regulators want to attract outside capital into New England, which has been suffering from a steep economic downturn.

BankAmerica has been scooping up dead thrifts throughout the West via sales conducted by the federal Resolution Trust Corp. Industry sources consider BankAmerica the favorite to buy San Diego-based Imperial Federal Savings & Loan, the largest failed thrift in the West.

Banc One, one of the nation’s strongest regional institutions, was one of the early favorites to buy Bank of New England. But the firm’s executives abruptly decided Monday night to pass, citing the uncertain prospects for economic growth in New England.

“We don’t know if it’s at the bottom. And if it is at the bottom, we can’t be sure of how long it will take to become a vibrant economy again,” Banc One spokesman John Russell said.

Bank of New England, which operates banks in Massachusetts, Maine and Connecticut, failed Jan. 6.