NEW YORK (Reuters) - A court ruling on Friday should clear the way for Bank of America Corp (BAC.N) to buy LaSalle Bank for $21 billion, and give it a powerful presence in the affluent Chicago area even as it boosts its exposure to Michigan and its troubled economy.
The ruling by the Dutch Supreme Court said ABN AMRO Holding NV AAH.AS does not need shareholder approval to sell LaSalle to Bank of America, the second largest U.S. bank. That in turn may make it easier for Britain’s Barclays Plc (BARC.L) to buy the rest of ABN AMRO and fend off a rival bid led by Royal Bank of Scotland Plc (RBS.L).
LaSalle has about 411 branches, 1,500 automated teller machines and 1.4 million customers. Its addition would give Charlotte, North Carolina-based Bank of America more than 6,100 branches and push it to the 10 percent federal cap on deposits nationwide. The bank would surpass JPMorgan Chase & Co. (JPM.N) as Chicago’s largest, with about 16 percent of area deposits.
“Illinois is a very important market,” said Marshall Front, chairman of Front Barnett Associates LLC in Chicago, which owns Bank of America shares. “Wells Fargo & Co (WFC.N) and other big banks have been trying to break in, and not very successfully. LaSalle gives Bank of America the branches and a strong position in middle-market lending.”
Adding LaSalle would also give Bank of America its first 264 branches in Michigan. At first glance, that part of the transaction appears more curious, given the travails of the state’s ailing auto industry and the region’s slow population growth. Michigan’s unemployment rate was 6.9 percent in May.
More recently, credit losses have become a growing concern. Huntington Bancshares Inc. (HBAN.O) and Independent Bank Corp. (IBCP.O), which have large presences in the state, have said soured loans amid a housing slump would cut into earnings.
Analysts fear a lending slowdown may weigh on results of area banks, which include Fifth Third Bancorp Inc (FITB.O), National City Corp NCC.N and even RBS, which in 2004 paid $10.5 billion for the former Charter One Financial Inc.
And in a move as symbolic as the bank considers it practical, Detroit-based Comerica Inc (CMA.N) plans this year to pack up its headquarters and move to Dallas. It said it wants to be closer to its faster-growing markets. That bank pledged to keep most of its Michigan presence.
“Some of our markets are not high-growth markets,” Bank of America spokesman Scott Silvestri said. “Once we put our system in place, we see a big opportunity to offer LaSalle customers a wider range of products and deepen relationships. There are also pockets of wealth in Michigan where we can offer services for higher net-worth clients.”
Detroit has lost more than half its population since 1950 and now has fewer people than San Jose, California.
But Front said LaSalle, in contrast, is well entrenched in “relatively prosperous” southern parts of the state.
“LaSalle’s presence is more tied to growth in southwest Michigan, which is a great vacation area for Chicago-area people, including myself,” he said. “Bank of America is a much better operator than its competition and will grow market share. If it can hold the LaSalle organization together, it should do well.”
Bank of America said it plans to close its LaSalle purchase “as soon as possible,” pending Federal Reserve approval.
Additional reporting by Karen Pierog