One for the money - interview with Banc One CEO-Chairman John B. McCoy - Cover Story

Chief Executive, The, June, 1994 by Joseph L. McCarthy

With Banc One's stock price under pressure, John McCoy's acquisition drive has stalled. Yet as interstate restrictions erode, the bank remains positioned to become one of the few truly national players.

Banc One's John Bonnet McCoy has banking in his blood. His grandfather, John Hall McCoy, is revered in corporate legend as a man who was driven from the helm of forerunner City National Bank and Trust only when a fifth heart attack killed him at age 71. During the Great Depression, when most bankers lent money at whatever interest rate they could get, John H. earned the nickname "5 Percent McCoy," because he stubbornly insisted that the quality of service he provided rated a premium.

His son, John Gardner McCoy, whose portrait hangs in a hallway of Banc One's executive offices in Columbus, OH, took over CNB in 1958 and ruled with an iron-fist and an explosive temper that prompted employees to speculate that the "G" in his middle name stands for God. John G., who handed the reins to his son in 1984 but remains chairman of the bank's executive committee, presided over the formation of the Banc One holding company in 1968 and launched an acquisition drive unsurpassed in the annals of U.S. banking. Banc One installed the first ATM in the U.S. in 1970, was the first bank outside California to market BankAmericard (precursor to Visa) in 1966, and became the first bank processor of Merrill Lynch's cash management account in 1977.

But it has been under the guiding hand of third-generation banker John B. McCoy that Banc One truly has come into its own as an acquisitions machine, gobbling up assets from California (a tiny presence) to Arizona to West Virginia and positioning itself as one of a handful of institutions with a genuine shot at becoming a truly national bank. In the generation since it was formed, Banc One has acquired more than 100 banks, becoming an $83.4 billion-asset company with 50,000 employees in 13 states. M&A hit a record $22.5 billion last year, eclipsing the previous record of $22 billion set in 1991. Net income jumped a whopping 30 percent last year to $1.14 billion, while return-on-assets was an impressive 1.53 percent.

"In making an acquisition, we look for something to build, "McCoy says, leaning forward, hands on the table, in the bank's cozy executive dining room, a lemon-yellow chamber with white, country-style, clapboard trim. "We like to buy an average bank and make it a great bank." Picking his way through a noon luncheon of chicken salad and coconut-cream pie, McCoy pauses, seeking the precise words to convey Banc One's secret to success. "We're big on retail and middle-market business, partly because it's so predictable," he says. "And we won't dilute shareholder value. Our thing is putting numbers on the board. But we do that by hitting singles."

Though Banc One was hot and hungry when McCoy took over from his father as CEO in 1984, and as chairman in 1987, he has raised the game to a new level, treating acquisitions as an ongoing line of business, using information technology to grind out cost efficiencies in new affiliates, and generating profits in many cases months ahead of market expectations. For the first time in his tenure as CEO, however, the Midas touch deserted McCoy late last year. Investors, jittery about Banc One's portfolio of derivatives--most of them in the form of interest-rate swaps--drove down the price of the stock more than 25 percent to around $32 a share, where it remains mired. The sell-off forced Banc One to cancel a stock-financed deal for Nebraska's FirsTier Financial and prompted speculation on Wall Street that its acquisition drive at least temporarily had ground to a halt. McCoy insists his bank remains in the M&A hunt, though the underbrush has thickened considerably. He adds that the dismantling of interstate banking regulations and competition with other superregionals, such as NationsBank, will continue to drive industry consolidation and create acquisition possibilities.

As a manager, 50-year-old McCoy represents a sometimes contradictory agglomeration of styles, at once both formal and informal. Officers recall how McCoy and a fellow executive dressed up as the Blues Brothers at an internal marketing conference, dancing across a stage to a rhythm-and-blues tune, then flipping dark sunglasses to the audience. For a meeting with investment bankers, he donned a basketball uniform with the Banc One logo to underscore the discipline and drive necessary to banking success. Yet behind closed doors, he is given to gray flannel suits and stickpins, and he clings to anachronistic rules handed down from his father, such as a taboo on employees drinking coffee in Banc One offices, and a ban on coming back to work after imbibing alcohol at lunch.

McCoy also parts from his peers in his grasp of information technology and the fact that he rose through the ranks on the operations side of the business, while most senior banking executives are grounded in lending or finance. In an overregulated industry, McCoy says, technology is perhaps the only way to gain a true competitive advantage. Though relatively autonomous, local banks are linked to mission control in Columbus through a sophisticated financial-reporting system that allows corporate executives to track some 40 different performance ratios. At the branch level, more than 500 so-called Personal Investment Centers offer a mix of mutual funds, brokerage services, and some insurance products. Information systems that drive the centers place key information at the fingertips of customer-service representatives, helping them to make credit decisions and tweaking them about cross-selling opportunities. But to fully take advantage of new technology, McCoy acknowledges that he must turn bean counters into salesmen and weatherproof the bank against the cultural change that will follow. "Some people go into banking because they don't want to sell," he jokes. "Some of our people will make it, and some won't."