Merging corporate cultures big challenge for Banc One

Journal Record, The (Oklahoma City), Nov 18, 1997 by Joseph A. Giannone Bloomberg News

COLUMBUS, Ohio -- Banc One discovered it's one thing to build an investment bank, and another to meld corporate cultures.

"People talk about the culture differences between commercial bankers and investment bankers. I'm here to tell you they exist," said Ronald Brooks, chief executive of Banc One Capital, the bank's investment banking unit.

The Columbus-based bank bought local securities firm Meuse, Rinker, Chapman, Endres & Brooks in 1990 to help the bank expand its menu of financial products for companies. Since then, Bank One has learned it isn't easy to merge corporate lenders and underwriters. Amid sweeping changes, banks want to offer high-margin underwriting and brokerage services to meet all of their customers' needs. Even with newly acquired securities powers, commercial banks still contend with rules requiring separation of capital markets from commercial lending, a legacy of Depression Era laws intended to protect depositors from big market gambles. Working in a house divided, Banc One's bankers and underwriters haven't fed business to each other as expected, Brooks said, as transactions that could have been referred within the company were lost to other securities firms. Through "serendipity," Brooks said, about 10 percent to 20 percent of investment bank referrals come from the corporate bank. "Our biggest customer is pent up inside the bank. A lot of deals were referred away," Brooks said. The unit underwrites municipal bonds, corporate debt, asset-backed bonds and other securities. Banc One blames some of the problem on cultural differences. While commercial lenders are paid to make loans, investment bankers are judged on their ability to underwrite bonds and other securities. Banc One is creating new compensation agreements and forming a sales force to help corporate lenders to promote capital markets products as well. "We can create a supermarket of solutions for the client. We want to make it so we're easy to deal with," said Brooks, who estimated this collaboration would boost the referral rate to 70 percent or 80 percent. To be sure, Banc One needs to boost capital markets business if it hopes to compete with regional banks and securities firms, analysts said. These changes "improve their ability to provide fuller product lines and let them maintain some of the revenue that might go to securities firms," said Michael Granger, an analyst at Fox-Pitt, Kelton. The moves come as Banc One looks to expand its Banc One Capital unit, which grew to 375 people from 275 last year, and offer new products such as higher-margin junk bonds and stocks. It expects to get regulatory permission to offer these products in three to six months. Brooks said the bank is looking for takeovers to expand the new businesses, with regional companies the most likely prospects. "It's something we're seriously looking at," Brooks said. "That's something we're likely to buy rather than build." So far, the bank has done a little of both. It's made some low- profile moves such as buying a 25 percent stake in Cain Brothers, a health-care investment banking boutique, formed a mortgage banking venture with Orix USA, a unit of Japan's fourth-largest trading company, and acquired Boston Financial, a real estate finance firm.