Washington, D.C., November 2006 On October 9th, Pittsburgh-based PNC Financial Services Group announced it would acquire Mercantile-Potomac Bank and its 240 branches throughout the National Capitol Region for $6 billion in cash and stock. Although the announcement did not garner huge media attention, industry observers will be closely watching the PNC-Mercantile transaction and other bank mergers to see how successfully the new pairings can integrate their systems and procedures. It is highly possible that the success or failure of some high profile mergers could touch off another round of the “merger mania” that characterized the retail banking industry in the late 1990’s.

Beginning in 1994, the number of bank mergers and acquisitions increased steadily each year and ultimately peaked in 1998 when 493 deals were completed. This was a similar number of deals as were completed in the prior 4 years, however, the value of the deals in 1998 was double that of any prior year as measured by total asset value and deposits. Since these heady days of the late 90's, the annual number and value of bank mergers and acquisitions continued on a steady decline through 2003. However, some key announcements in the last couple of years seem to point in a definite upswing in retail bank merger activity.

Integrating divergent systems and procedures remains on-going for Capital One Bank whom recently jumped into the Top 10 in retail banking with their $14.6 billion purchase of New York-based North Fork Bank in March 2006, not long after the credit card giant acquired Hibernia Bank out of New Orleans. McLean, Virginia-based Capital One expects to complete its integration of North Fork on schedule by the end of this year.

The bellweather case of whether integrating vastly different systems and procedures on a grand scale can be done successfully is underway right now as Bank of America seeks to consummate its $35 billion purchase of credit card behemoth, MBNA. Bank of America just announced on October 25, 2006 that it had successfully migrated 50 million MBNA credit card customers into Bank of America’s website and customer call centers. Industry observers are closely monitoring this deal to see if Bank of America can increase its bank business despite the challenges inherent in marrying two companies of this size. To date, Bank of America has incurred over $1.3 billion in expenses related to post-merger integration activities. However, if the statements by B of A spokesmen are accurate, the nation’s largest bank has already garnered $795 million in costs savings though the first three quarters of this year as a result of efficiencies, gained as a result of the merger.

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