October 29, 2008

The three U.S banks that acquired major institutions in the latest unfolding of the credit crisis said through spokespeople that it's too early to comment on their technical integration plans.

According to an industry source who preferred not to be named, Wells Fargo likely will keep Wachovia's retail technology since its branch systems were one of the reasons Wells and Citigroup fought over the Charlotte, N.C.-based bank.

As for Bank of America's plans for brokerage Merrill Lynch, Alois Pirker, senior analyst with Aite Group, says the bank will surely keep the "multimillion-dollar" system Merrill developed for its 5,000 brokers worldwide. That would mean dropping, as soon as is practical, Bank of America's outsourcing arrangement with Fidelity's National Financial unit in Boston, Pirker says, plus the loss of "hundreds of jobs" in Boston. That's where Bank of America's small brokerage business currently is based, but it likely will shift the business to Merrill's New York locale.

JPMorgan Chase plans to integrate WaMu's systems with its own in two years, says spokesman Tom Kelly. But as of yet, "We don't even know what we have. The Fed put [WaMu] in receivership at 6 p.m. on Wednesday [Sept. 24] and we acquired them at 7 p.m. the next day," he adds. "We're six months behind where we'd normally be on an acquisition."

As for how investment banks, newly chartered as depositories, will enter retail banking, building branches seems unlikely. If they take a technological approach — via online or m-banking — Aite's Pirker notes a major obstacle: "In the U.S., unlike in Europe, banking and brokerage are run as very separate businesses," he says.

Securities industry analyst Larry Tabb, CEO of Westborough, Mass.-based TABB Group, recently speculated that Goldman Sachs and Morgan Stanley will enter the retail space via acquisition — pointing to Bank of New York Mellon, State Street and Northern Trust as potential acquisitions. On the same day, Oct. 15, it emerged that Bank of New York Mellon had been appointed to service the $700 billion U.S. government bailout fund for banks.

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