Finance Essay Paper on The merge of Nations Bank and Bank American Corp

The merge of Nations Bank and Bank American Corp

Executive Summery

            Banks are important institutions in the society as they not only help individuals save their wealth, but also enable the society to secure their future. Mergers in banks have become a common thing in the recent years because of financial markets dynamism. The paper seeks to look at various aspects in regards to bank mergers.  Examples are, combined banking operational frameworks, profits and losses, market dynamics besides technological advancements. This can be achieved in various ways; establishing different changes that are brought by mergers in the banking industry, stipulating why studying the topic mergers is important, considering structural change brought by bank mergers besides addressing cultural change brought by bank mergers. Since the topic is of essence, the paper will look into the merits and demerits of bank mergers. It seeks to do this through analyzing different literatures in order to come up with different perspectives on the topic. It will research on the case study of the national bank and its merger with the Bank American Corporation. It will look at both the history of Nations Corporation and that of Bank American Corporation. It will examine the history of their merger. It will look how the merger has affected these two banks businesses. The paper will look at the changes that the different companies have undergone through using different quantitative and qualitative methodologies. The paper will analyze the case study relating to the literature review and methodology. The paper will then give recommendation putting into mind the case of National bank and bank America Corp. The paper seeks to give a detailed approach in regards to the topic of mergers.


            Mergers are important topics especially when discussing organizational changes. Different organizations undertake mergers for different reasons. Examples include capacity capitalization, market satisfaction and resource mobilization. The most significant reason why different companies merge is to increase the resources it has. Through merging different institutions, different companies are able to share resources thus increase the qualities of its services. It enables companies to increase their market share. Different companies are able to increase their market shares as it also brings together different customers together. Bank mergers are important in American history. The most significant among all the mergers was between the Bank of America and Nations Bank (Federal Reserve System, 1997) Mergers often provide a foundation for rapid growth of organizations. It also gives an organization a chance to have merit over competitors in the industry. Mergers are so crucial that it enabled Bank of America to achieve the status of being the leading bank in America (Federal Reserve System, 1997). Mergers do not only change the market prospects of an organization, but it also changes the structure and culture of an organization. It is important to look at the merits and demerits of the mergers in order to determine if mergers are of essence to an organization or not.

Literature review

Structural changes

            When merging occurs, there needs to be changes in the structure of several banks in order to integrate the structures of banks that have undergone the merger. Most of the banks that undertake mergers often reduce the number of employees. Because different companies undertake mergers, they have to reduce the number of workers in order to increase the efficiency in the work place (Federal Reserve System, 1997). Banks go through different structural changes that often lead to the changes in management practice. After the merger between the Bank of America and Bank American Corporation, the bank underwent different structural changes in order to come up with an efficient management system (Bajaj 2009, p.4). Under this new management system, the CEO is charged with the responsibility of the daily operation of the business. He reports to the board of directors who are charged of accessing the CEO’s performance. The CEO carries out the duties with the help of different officers who inspect various areas of the banking company. Each office is made up of a senior manager who is then followed by officers in the entry-level and mid-level. These officers are charged with the responsibility of giving clients equal opportunities. After mergers between different banks, the bank often goes after different markets (Focarelli & Pozzolo 2001, p. 2305) and   (Federal Reserve System, 1997).

Cultural change

            Most organization adopts particular cultural set up depending on the mode of achieving organizational objectives (Bajaj 2009, p.4). Therefore, when two banks combines or go through mergers the employees are exposed to different cultures that they did not experience before (Focarelli & Pozzolo 2001, p. 2305). This is a major challenge affecting bank merging as more training on new institutional frameworks and market dynamics is a pre-requisite (Federal Reserve System, 1997). When employees of different companies try to preserve the culture of each organization after merger, it often leads to cultural clash (Focarelli & Pozzolo 2001, p. 2305), because, institutional merging completely changes the working mechanism of the newly formed banking sector with a newly defined cultural focus. High instances of cultural changes often tend to lead to increased stress levels and uncertainty. It also tends to lead to low morale, and employee turnover. Banks should look into the different changes in culture between the two organizations before it undertakes a decision to merge.

Benefits of mergers

Mergers enable companies to acquire diversification. This is often the reduction of risk through investment opportunities. Different organizations go through mergers and acquisition in order to increase financing on the industry (Houston, Christopher & Ryngaert 2001, p. 285). There are tax benefits that are associated with majors, this help companies to carry forward taxpaying. Mergers also allow a company to benefit from economies of scale (Houston & Ryngaert 1994, p. 1115). 


            The key demerit of mergers is that, it reduces the level of competition in the banking industry. When big banks merge, it often leads to reduction in the intensity of competitors (Zolo & Sing 2004, p. 1233). The customers of the banking industry will hurt since they would not have options when it comes to choosing a bank or applying for loans. The banks might hike the interest rates, and because no other alternative is available, the customers will have to incur losses from their savings

Case Study

            Bank of America Corporation was formed in 1998, after the merger between commercial banking and Bank American Corporation. It is the third largest bank in America (Federal Reserve System, 1997). The company is ranked as the best in terms of deposit market shared interest in Texas, Georgia, California, Florida, Washington, and North Carolina. BankAmerica was started in the year 1904 as the bank of Italy. Its credo was fundamental in the time as it aimed to serve the little members it had. It started from a humble beginning in tavern (Zolo & Sing 2004, p. 1234). It grew to be a force that revolutionized the banking industry. Armadeo Giannini was the founder of the BankAmerica. He was the most significant persons in the twentieth century in the American banking industry. His policy of giving out loans to the common citizens was unheard of. This is because most banks lent out money to wholesale commercial business. The bank grew significantly in the year 1910 attaining an asset of $ 6.5 million. By the end of 1920, the asset of the bank grew to $ 157 million (DeLong 2001, p. 221). This growth surpassed all the other banks that were in California. After conquering the California region, it turned to the national scene. Giannini believed that few national and regional banks would dominate American banking by using branches, due to this he intended to lead the way. He already had the ownership of East River National Bank and New York Bowery as well as numerous banks in America. After this, he established bank of America in Washington. In the year 1928, he created a holding company to supplant BancItaly. This company was referred to as Transamerica. In 1929, the banks overcame the $ 1 billion assets. By the year 1936, the bank of America was the fourth largest bank in America. Its asset had grown to close to $ 2.1 billion (Zolo & Sing 2004, p. 1235). The bank put into place a new kind of loans referred to as the Timeplan installment, this increase the personal credit loan from $ 50 to $ 100.

            National bank was created in the year 1991. This was a result of a merger between North Carolina National bank and C & S. This created the fourth largest banking industry in America. McColl was the first president of the bank. These two companies entered into a merger after experiencing a decade of rapid growth. This corporation worked to increase their presence in the banking industry. The bank was to be known as a company that practiced clear management and cultural integrity. The bank made several instrumental purchases in the early 1990’s. It acquired St.Louis. In the year 1998, the company merged with Bank America to create the first coast-to-coast banking service (Houston & Ryngaert 1994, p. 1116). This merger was termed as merger of equals. These banks were forced to take part in re-structuring in order to streamline its activities after going through different problems because of the merger. The merger between the two companies created the third largest bank in America and thirteenth in the American corporation.

            Two American banks argued out that there is safety in numbers, hence decided to merge. These two banks are National Bank and American Corporative. This move led to the development of a national giant and a powerhouse in the banking industry in Texas. The merger stipulated that the bank would have 27 percent of the states asset. At the formation of the merger, it was stipulated that these banks would have $67.5 asset in their grasp. Before the year 1998, the Bank of America was referred to as National bank. In the year 1998, this bank made an acquisition with the Bank of America. When these banks combined, they adapted a collective nominal Bank of America. Even though the contract was an acquisition deal, it was technically a merger. This is because it had the constitution of a merger. Bank of America in the year 2004, went a step ahead an acquired National Processing Company. This company was involved in Master Card and Visa deals. In the similar period, the bank made a contract between them and FleetBoston Financial. This acquisition enabled the bank to attain market in the North-Eastern America. In the year 2006, the bank also attained an acquisition deal of MBNA (Bajaj 2009, p.5). This deal made the bank to have an merit when it comes to the credit market in America. In the same year, the bank stipulated that it would make a deal that would go down to history with Lassale Bank Corporation, ABN Amro North America, and Lasalle Corporate finance. In the year 2008, the bank stipulated that it would obtain Countrywide Financial.


The study intends to employ both quantitative and qualitative methods of data collection. The former methodological approaches will incorporate use of questionnaires which will be designed and availed to selected bank mergers. This method of data collection will be facilitated by pre-visits survey of the available accessible bank mergers. These will be recorded and statistical analyses in findings correlated as with respective mergers. Primary data collection will be enhanced by use of direct interviews and telephones. Secondary data collection is by literature review of the peer reviewed articles on the subject discussed in this paper. Comparative analyses of the actual research findings and the reviewed articles will provide the basis upon which hypothetical grounds would be measured.


The merger between Nation Bank and Bank America Corporation resulted in the development of one of the leading banks in America. It enabled these two companies to increase its market, as it was the first bank to deal with coast-to-coast market. This was due to the increased resources. The two banks had to change their structures including abandoning some of their names in order to accommodate the merger. The merger between the two banks has made the Bank of America to be one of the banks with the highest financial assets.


Mergers are important aspect of the banking industry. It not only allows a company to increase its financial resources, but is also makes it diversify its risk and to increase its market share. The merger between the National Bank and the America Corporation was instrumental in the development of one of the leading banks in America. The merger although was an acquisition it had all the composition of a merger. After the merger of the two banks, it is apparent that the organization had increased revenue, as it was able to buy out subsequent institutions. Mergers have several merits to a company, but also have some demerits to the clients. It leads to monopoly in the banking industry. In order to avoid different cultural conflicts, it is important to restructure the organization in order to accommodate both organizations. Change is only effective when organizations undertake efforts to welcome it. Distinct organizations require more structural alteration in order to sustain a merger, as compared to organizations that work in similar line.


Mergers are important aspect of the society. When companies are under taking a merger, they should learn the traditions of the organization that they are merging with in order to avoid cases of conflict. Most organizations get into mergers by only focusing on the financial past of different organizations. In order for a merger to thrive effectively, different cultures must integrate in order to bring out coexistence. In case of cultural conflict, each organization should abandon their old culture and adapt new ones, or integrate both the organizations culture, in order for the new organization to run swiftly. It is important to change the different structures of organizations in order to accommodate the different managers and workers of both organizations. The structures should be changed in a way that makes both organizations to share responsibility. When it is a merger of equals, both organizations should take part in decision-making in order to avoid conflicts of power, especially due to being shortchanged.


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Focarelli, Dario & Pozzolo A. Franco, 2001, The patterns of cross-border bank mergers and shareholdings in OECD countries, journal of Banking & Finance 25 (12), 2305-2337, DOI: 10.1016/S0378-4266(01)00192-3.

Houston ,Joel, Christopher M, James & Ryngaert D. Michael, 2001, Where do merger gains come from? Bank mergers from the perspective of insiders and outsiders, journal of Financial Economics, 60(2), 285-331, DOI: 10.1016/S0304-405X(01)00046-0.

Houston F. Joel and Ryngaert D. Michael, 1994, The overall gains from large banks mergers, Journal of banking and finance, 18 (6), 1155-1176, DOI: 10.1016/0378-4266(94)00065-4.

Zolo, Maurizio & Sing Harbir, 2004, Deliberate learning in corporate acquisitions: post-acquisition strategies and integration capability in U.S. bank mergers, Strategic Management journal, 25 (13), 1233- 1256, DOI: 10.1002/smj.426.

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