NationsBank, BofA Are a Step Closer to Merger

BankAmerica Corp. and NationsBank Corp.’s $60-billion merger was approved by the Justice Department and now faces just one regulatory hurdle.

The banks agreed to sell 17 branches with $491.6 million in deposits in New Mexico, the only region where the two companies overlapped enough to concern regulators.

The San Francisco-based BankAmerica, the nation’s fifth-largest bank, and Charlotte, N.C.-based NationsBank, the third-largest, still must get approval from the Federal Reserve Board, which plans to consider the transaction Monday. The boards of both companies also have to approve the deal, which is scheduled to conclude in the third quarter.

The merger, announced April 13, would create the nation’s largest bank. As a bank holding company, the new BankAmerica would have about $570 billion in assets, second in size only to the proposed Citicorp and Travelers Group Inc. marriage. The new company, which is to retain the BankAmerica name but be based in North Carolina, would have 29 million customers in 22 states.

The combined company would have nearly 8.5% of the nation’s bank deposits, near the 10% limit that any one bank can have under federal law.

There’s very little overlap between the two companies because BankAmerica is concentrated on the West Coast, while NationsBank operates in the East and Midwest. The different territories led analysts to expect both the Justice Department and the Fed to approve the combination.

The banks have said that as many as 8,000 jobs would be eliminated between them to achieve $2 billion in cost savings.

In New York Stock Exchange trading, BankAmerica shares fell $2.13 to close at $79.38, and NationsBank shares fell $2 to $70.06. The Justice Department’s announcement was made after the close of U.S. trading.

The Justice Department will advise the Fed that, subject to sale of the deposits and branches, it will not oppose the merger. NationsBank agreed to sell 17 branches in three New Mexico markets where their operations overlap enough to cause concern of market dominance: 15 in Albuquerque and one each in Clovis and McKinley County.

The agreement with the Justice Department calls for a larger sale of deposits than what the banks had previously announced.

In May, the companies announced plans to sell $357 million in deposits in the three New Mexico markets.

“Our investigation of bank mergers generally indicates that the area of competitive concern is loans to small and medium-size businesses,” said Joel Klein, the Justice Department’s antitrust division chief in a statement. “This settlement preserves a competitive choice for small business and other consumers in New Mexico who would have been harmed by this merger.”

There’s very little overlap between the two companies because BankAmerica is concentrated on the West Coast while NationsBank operates in the Southeast, mid-Atlantic and Midwest.