Wachovia goes west
The big news today is the planned acquisition of California-based Golden West bank by North Carolina-based Wachovia Corporation, the #4 bank in the US. The move continues a move to consolidation and nation reach by the top handful of commercial banks. The deal is for around $26 billion.
The top three banks are Citigroup, Bank of America, and J.P. Morgan Chase. Wachovia won't change its rank with the deal, but will grow by around 25% in valuation, keeping right behind the bigger banks.
Golden West is the last major independent California bank, founded in 1963. The deal extends Wachovia's reach, which is strongest in the South and East Coast. It also expands the company's mortgage business, a particular strength for Golden West. In fact, the company specializes in adjustable rate mortgages (ARMs), which are likely to bring in steady income if inflation keeps rising. The company is the #2 savings-and-loan behind Washington Mutual, and has 275 retail branches under the name World Savings.
Wachovia has a long history of mergers, the biggest being its 2001 merger with First union Bank. In 2004, it acquired another major Southern bank, SouthTrust. In 2005, it purchased Wescorp, a smaller California bank for around $4 billion, plus AmNet, a smaller California mortgage company.
The deal, if successful, will the 8th largest banking deal ever in the US. It comes in the wake of many multibillion dollar bank deals over the last decade. Just this year Bank of America bought credit card issuer MBNA for $34 billion; Capital One, another credit card company, bought New York bank North Fork Bancorp for $14 billion.
As a Wall Street Journal article ("Wachovia Strikes $26 Billion Deal For Golden West", 5/8/06) notes:
The deal furthers the rapid consolidation of the banking industry into a small number of national players, complemented by a coterie of small regional and community banks. Wachovia has been the most voracious of all, forging about 140 takeovers and mergers -- large and small -- that have transformed it from a sleepy Southern bank into a coast-to-coast financial-services giant.
