As posted by: Wall Street Journal
Shareholders in Charlotte, N.C., and Cleveland will vote today on deals to sell hometown banks Wachovia Corp. and National City Corp. to rivals in San Francisco and Pittsburgh, as the industry's traditional geography continues to be reshaped by aggressive, government-encouraged consolidation.
Both Wachovia and National City were forced to find buyers once regulators determined they weren't likely to survive this year's financial crisis if they remained independent. The votes are expected to pass easily.
Already gone from the nation's top-10 banking centers as measured by assets are Seattle and Calabasas, Calif., formerly headquarters to the vanquished Washington Mutual Inc. and Countrywide Financial Corp.
Cleveland was the nation's fifth-largest banking center before 2008's turmoil began, according to data from SNL Financial, and will drop from the top 10 once the year is over. The other major banks left in that city, KeyCorp. and Amtrust Bank, remain hobbled by loan losses.
Pittsburgh, home to National City acquirer PNC Financial Services Group Inc., would rise to fourth-largest among U.S. banking centers, marking a comeback for a city that gave birth to a litany of financiers and provided capital for many of America's first large industrial enterprises, including Alcoa Inc. and Gulf Oil Corp.
In 2007, Pittsburgh lost to New York the headquarters of Mellon Financial Corp., a bank founded by the Mellon family and once run by 1920s Treasury Secretary Andrew Mellon.
Charlotte's hold on the title of second-largest banking hub outside New York will also be tested with the loss of Wachovia to San Francisco based Wells Fargo & Co.
Once a sleepy railroad and mill town, Charlotte became a banking powerhouse in the 1980s and 1990s on the backs of two rivals -- NCNB Corp. and First Union Corp. -- and their acquisitions of other banks across the country.
In 2001, Wachovia emerged from the combination of First Union and the old Winston-Salem, N.C.-based Wachovia. First Union took the Wachovia name, which is derived from a moniker given to North Carolina land purchased by Moravians in the 18th century ("Wachau"), according to corporate history.
But Wachovia ran into problems following its 2006 acquisition of California adjustable-rate mortgage lender Golden West Financial Corp., which exposed it to large mortgage losses. Last quarter, Wachovia posted a loss of $23.88 billion, one of the largest losses in American corporate history.
A decade ago, NCNB successor NationsBank, the larger of the Charlotte banks, poached away San Francisco's trademark financial institution, BankAmerica, in a deal valued at $43.02 billion. The Charlotte bank then adopted the name Bank of America Corp. and folded BankAmerica into its Charlotte headquarters in the Southeast, prompting laments about California's loss of influence in financial circles.
Now San Francisco is returning the favor, snagging Wachovia from Charlotte. That "can only be viewed as banking karma," said Miami banking consultant Ken Thomas.
Job cuts in Charlotte are expected next year once Wells completes the acquisition. Wachovia employs about 20,000 in the Charlotte area, making it a larger local employer than Bank of America. Only one of 11 senior officers in the combined Wells-Wachovia will be from Wachovia and a longtime Wells executive will be in charge of the bank's eastern region, exacerbating local tensions about a loss of control and influence in 2009. Wells CEO John Stumpf told Wachovia employees earlier this year that he could make "no promises."
"The first quarter is going to hit this city like a ton of bricks," said Tony Plath, a finance professor at the University of North Carolina-Charlotte.
To be sure, the major bank left in Charlotte, Bank of America, is a big one. With the purchases this year of California mortgage lender Countrywide Financial Corp. and New York securities firm Merrill Lynch & Co., Bank of America will become the nation's largest bank as measured by assets. But even Bank of America has stumbled, given its broad exposure to consumer credit problems. It is planning 30,000 to 35,000 job cuts over the next three years.
Wachovia's sale to Wells also ends the scrappy crosstown Charlotte bank competition that played a key role in reshaping retail banking across the U.S. for more than two decades. But Bank of America Chief Executive Kenneth Lewis now views Wells Fargo as a tougher competitor than Wachovia, according to people familiar with his thinking.
The current leadership of Wells and Bank of America have been battling for the top spot in California since 1998, when Minneapolis-based Norwest Corp. merged with Wells.
Cleveland also anxiously awaits its fate. The 163-year-old National City employs 7,800 workers in the Ohio city, and the bank was long viewed as a stalwart lender in the Midwest. Its gamble to become a major U.S. mortgage lender by diving into subprime mortgages and home-equity loans outside its Ohio footprint led to $2.66 billion in net losses during the first nine months of 2008.
Cleveland, with high levels of foreclosures and unemployment, "will unfortunately be hurt even more with this loss," said Mr. Thomas, the banking consultant. PNC has made assurances about jobs and community programs, but "the buying bank always publicly assures the residents of the losing city," he said.
