While Banks See Future in Full Service, Many Companies
Wall Street Journal (09/14/00) Vol. 104, No. 37 p.C20; Thomas, Trevor

Behind Chase's acquisition of J.P. Morgan & Co., as well as Citigroup's recent series of acquisitions, is the idea that financial institutions must become a one-stop shop for financial services. But many customers still prefer to buy financial services from different institutions. One reason is to get the diversity in ways of thinking and philosophies that come from receiving services from different companies. Also, smaller businesses dislike the way that a giant institution will sometimes try to pressure them into buying products just because the big company offers them. Furthermore, many quickly growing companies fear that they will become too large to deal with community banks but will still be too small to attract the attention of a giant financial institution. On the other hand, some businesses like the trend of banks offering many services. International businesses are able to carry on relationships with the same institution in different countries, instead of dealing with different banks in each country. Banks themselves like one-stop shopping for financial services because it affords them an economy of scale. A bank arranging a syndicated loan for a client may already have done research on the client that can be used to underwrite a bond or stock offering. On the downside, no one is lowering costs to consumers and power is becoming very concentrated. For instance, according to Loan Pricing Corp., Chase and J.P. Morgan, combined, were the lead arrangers for 47 percent of the investment-grade syndicated loans in the first half of the year and were the lead arrangers of 24 percent of leveraged loans to riskier companies.

Back   |  IRA.com Home   |  News Archive