When Wachovia Corp. unraveled on Monday morning, its crosstown rival Bank of America Corp. became an even bigger star.
Bank of America has already emerged as one of the few winners in the market turmoil that has upended the nation's financial realms. Analysts said Monday that Wachovia's demise gives Bank of America the chance to pick off nervous employees and customers, and to gain even more local influence.
“This is a chance for them to take advantage of their weak neighbor,” said Joe Gordon, managing partner at Gordon Asset Management in the Raleigh area. He has been telling clients since late last year to dump their Wachovia shares.
“If I were Bank of America, I would be in full assault. And I don't mean that in a bad way.”
Still, Bank of America has benefited from having another major bank based down the street. The two-bank moniker has helped recruit talented workers to Charlotte, and it's given each bank a local repository of potential workers.
“I think they look at each other as both allies and big competitors,” said H.A. “Humpy” Wheeler, the former president of Lowe's Motor Speedway just outside of Charlotte. “I don't think anybody over at Bank of America is rejoicing about this. They're in the same industry; they all know each other. I'm sure they're feeling a little sorry for the people they know and what they're going through.”
The Charlotte Chamber cites both banks when it calls Charlotte the country's No. 2 banktown. But it's Bank of America that carries most of the weight.
Wachovia has a far greater share of N.C. deposits: 40 percent to Bank of America's 15 percent, according to the latest information from the Federal Deposit Insurance Corp. It also employs more people in Charlotte: about 21,000 to Bank of America's 15,000.
But in most respects, Bank of America plays in a bigger league. It's the country's leader in deposits, credit cards and mortgages. If its recently announced purchase of investment bank Merrill Lynch is approved, it will be tops in wealth management, too.
Counting the Merrill Lynch purchase, Bank of America has some 317,000 employees and assets of $2.9 trillion. Wachovia had about 120,000 employees and assets of $812 billion.
Bank of America's earnings were down 41 percent in the second quarter, to $3.4 billion, but it fared far better than Wachovia, which lost $9.1 billion. In the past year, it's picked up not only Merrill Lynch but also California mortgage lender Countrywide Financial Corp. and Chicago's LaSalle Bank.
Steven Mann, a finance professor at the University of South Carolina, recalled taking a group of students to Bank of America's uptown trading floor a couple of years ago, where one student asked a trader about the competition in Charlotte. “We don't have any competitors in Charlotte,” the trader replied.
Mann said he wouldn't be surprised if Wachovia customers start defecting to Bank of America or Winston-Salem-based BB&T Corp., which is the third biggest bank headquartered in North Carolina. “Banking is based on trust, and for good or ill we trust people like us,” Mann said. “You think, ‘Those New York banks, they're the ones that caused all these problems.'”
Bob Denham, a BB&T spokesman, said the bank has been gaining customers from other banks, including Wachovia, for several months. He called the trend a “flight to quality.”
“They feel better about our institution,” Denham said.