Sunday, December 26, 1999
Bank One looks for steady footing after shaky year
Analysts doubt sale imminent
BY DAVE CARPENTER
The Associated Press
CHICAGO — Bank One isn't likely to be sold anytime soon, analysts said last week, despite the departure of the embattled chief executive of the nation's fourth-biggest bank that raised questions about a possible merger.
John McCoy's early retirement, as the bank characterized it last week, came as a relief to many shareholders and left the Midwest banking giant poised for change after a wretched 1999. It also fueled speculation of a merger, though officials have repeatedly said neither the bank nor Bank One's troubled credit-card unit is for sale.
The move is “a clear positive for Bank One,” according to a report issued Wednesday by investment bank Goldman, Sachs & Co.
But the next few months will be a key transition period as the board of directors looks for a permanent chief executive officer — possibly acting CEO Verne Istock — and ponders whether a sale of its flagging credit-card unit or the entire company is necessary.
Slowing growth and missteps at the company's First USA unit were widely viewed as responsible for abruptly ending Mr. McCoy's 15-year tenure as CEO and three generations of McCoys at the helm of Bank One. The bank company was based in Co lumbus, Ohio, until merging with First Chicago last year.
First USA, the nation's No. 2 issuer of credit cards after Citibank, once boasted high-flying growth. But its questionable pricing strategy and related headaches were blamed for knocking a half-billion dollars off Bank One earnings this year, helping the stock plummet 47 percent in the past four months.
Like others who follow the banking industry closely, Goldman Sachs said the company's first option is almost certain to be to try to overhaul the company from within.
That echoes Bank One's position under Mr. McCoy and now.
“We believe that the turnaround at the company will take the form of a new management team rather than sale of the company, given, in part, our assumption that the underlying franchise likely has more intrinsic value than that likely offered by potential buyers,” the research firm's report said.
But the bank's directors will be under pressure to select a permanent management team soon and produce evidence of a comeback in the next few months. Otherwise, the bank may not remain independent.
“If the situation doesn't improve, I think you're probably looking at an auction in the spring,” said Diane Glossman, a bank analyst for Lehman Brothers in New York.
A suitor is most likely to come from among the three bigger banks than Bank One, she said — Citibank, Chase Manhattan or, less likely, Bank of America.
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