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Local banks hope to gain from merger
By Mike Comerford Daily Herald Business Writer
Posted January 16, 2004 - Bloomberg News

Brian Schultz is president of First National Bank of Naperville but on Thursday he was answering the phones due to the volume of calls coming in from Bank One customers. "There isn't an employee here that hasn't gotten a call about Bank One," said Schultz, whose bank group has $200 million in assets. "People just don't want to go through another merger."

Schultz and other community bankers on Thursday said the proposed $58 billion merger of Chicago-based Bank One Corp. and New York-based J.P. Morgan Chase & Co. is likely to benefit smaller, high-touch oriented banks. Most major bank mergers result in some customers bailing but the 1998 merger between Bank One and First Chicago NBD resulted in so many headaches rival bankers are hopeful that more merger-weary employees and customers will leave this time around.

"We hope to gain new people and to gain new customers," said Edward Wehmer, chief executive officer, at Lake Forest-based banking chain Wintrust Financial Corp. Attempting to minimize the fallout, Bank One's Chief Executive Officer Jamie Dimon and J.P. Morgan CEO William Harrison Jr. were in Chicago on Thursday to reassure both customers and employees. "We're going to be totally committed to our community in Chicago," Dimon said in a news conference.

Later, Bank One conducted a teleconference for employees from its downtown headquarters. Facilities such as the credit and insurance center in Elgin were able to view the conference via television. The merger has caused concern among some employees because the merged firm intends to cut 10,000 jobs and $2.2 billion in expenses over three years.

Still, Mayor Richard M. Daley on Thursday issued a statement noting that the merged J.P. Morgan Chase & Co. intends to keep its retail operations in Chicago and initial job cuts are likely to be on the East Coast. The merger has been good for Bank One employees with stock in the company. Its stock jumped 12 percent on Thursday, or $5.20 a share, to end at $50.42. Personally, Dimon could make $75 million in the transaction, according to estimates made by the Wall Street Journal. Dimon said the company will study whether a name change is in store for local offices after the merger is finalized this summer. Customers won't see major changes before then, he said.

As for the loss of customers and employees, some observers say community banks may be overly optimistic. Because J.P. Morgan doesn't have a retail presence in the Chicago area, the impact on workers and customers may not be dramatic, said Paola Sapienza, professor of finance, Northwestern University's Kellogg School of Management. "There's some evidence that a very big bank will lose some customers in the short term," she said. "But then they make up for it. I really don't think there will be long-term consequences."

The biggest impact may be to Chicago's pride. Because the merged bank's headquarters will be in New York City, Chicago is losing its largest bank. And that raises questions about philanthropic giving and real estate commitments, such as the planned $100 million renovation of Bank One's headquarters in Chicago.

In the meantime, community bank chains such as Wintrust will be busy with mergers of their own. The number of banks owned by Wintrust rose to nine late last year with the acquisition of Advantage Bank in Elk Grove Village and Village Bank in Arlington Heights. Currently, it has 36 branches and about $4.7 billion in assets. "Any change in the big bank market affects us," Wehmer said. "We've positioned ourselves as the alternative to the big guys."