Justice Dept. Won’t Oppose B of A Merger

The Justice Department said Friday it will not oppose the merger of BankAmerica Corp. and Security Pacific Corp. because they have agreed to the divestiture of 211 branches with $8.8 billion in deposits in five states and to the sale of $2.7 billion in loans.

As a result of the agreement, the department said it will notify the Federal Reserve Board that the merger, the nation’s largest ever, “would not harm competition in any market.” The Fed, which regulates bank holding companies, is expected to approve the merger this spring.

The union would create the nation’s second-largest bank holding company, surpassed only by Citicorp. BankAmerica would be the dominant bank in California, Arizona, Washington and Nevada, and also would have a large presence in Oregon.

The Justice Department, worried about a concentration of banking power, has been in antitrust negotiations with BankAmerica since the fall. “There are 180 markets, and we had to evaluate more than 100 of them that would be affected by the merger,” a department official said. “This was unprecedented in its demand on our resources.”

An important breakthrough came Friday when BankAmerica budged from its bargaining position and settled its differences with Washington state officials by agreeing to sell 17 more branches than bank executives had planned.

Under the new agreement, 86 Security Pacific branches with $3.4 billion in deposits will be sold, or about 6% of all deposits in Washington held by banks, thrifts and credit unions. That is an increase from BankAmerica’s previous proposal to sell 69 branches with $2.5 billion in deposits.

In addition, BankAmerica will sell $1.7 billion in loans in Washington state. It also must clear the sale of any branches with the Washington attorney general’s office.

Antitrust concerns were especially strong in Washington state, where Seafirst--owned by BankAmerica--and Security Pacific are the state’s two largest banks. Branches also will be sold in Arizona and Oregon, where officials have expressed fears of reduced competition.

BankAmerica was pleased with the Justice Department’s decision. “This is a very positive development--it’s a significant step in the regulatory approval process,” said Peter Magnani, a spokesman at the bank’s San Francisco headquarters.

The divestitures “will assure that bank consumers in the western states continue to enjoy the benefits of competition, while permitting BankAmerica to obtain the cost savings it expects from the largest bank merger in history,” said James F. Rill, the assistant attorney general in charge of the antitrust division.

Of the 211 branches to be sold, 47 are in California, 30 in Nevada and 86 in Washington. The remainder are in Arizona and Oregon, although specific numbers for those states were not available Friday.

The branches to be sold will not be immediately identified, said J. Mark Gidley, deputy assistant attorney general. Details are “being kept confidential to prevent any kind of disruption in the system,” he said.

The California branches to be sold include 28 Security Pacific branches in Central and Southern California with $1.2 billion in deposits. On Friday, it was announced that Union Bank, a San Francisco bank controlled by Bank of Tokyo, had agreed to acquire those offices. No price was disclosed, although consultants in the field estimated that Union Bank probably paid $30 million to $35 million.

Although Fed approval is now a virtual certainty, the Fed may set some conditions related to divestitures or programs operated by the banks in low-income areas.

On Friday, one community group, Communities for Accountable Reinvestment, filed a challenge to the merger with the Fed. The Los Angeles group said that the banks made too few loans to minority and low-income customers, and closed an excessive number of branches in low-income areas over the past few years.

BankAmerica, with more than $115 billion in assets and $92 billion in deposits, is the nation’s third-largest bank holding company. Security Pacific, based in Los Angeles, ranks seventh with more than $76 billion in assets and $58 billion in deposits.

Times staff writer James Bates in Los Angeles contributed to this story.