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City Bank of Commerce of Columbus

Commercial National and City Bank of Commerce of Columbus, Ohio merged to form City National Bank and Trust in 1929. John H. McCoy became president in 1935, starting a family dynasty. His son John G. McCoy took over for him in 1958. In the 1960’s, City National hired a comedienne, Phyllis Diller to do its radio and TV commercials. The commercials launched Diller’s career and made the bank famous. In 1966, City National offered the first Visa credit Card outside of California. It also created the first drive-up bank, and was one of the first banks to use ATM’s. Later, McCoy formed a holding company called First Bank Group of Ohio, which became Banc One in 1979. As soon as interstate barriers collapsed, the bank moved into India, Kentucky, Michigan, and Wisconsin.

John B. McCoy, third generation of the banking family, became CEO in 1984. During his reign, the bank acquired over 100 banks in the Midwest. The bank also bought over twenty failed banks and expanded into Texas in 1989. In 1991, the bank moved into Illinois. The bank entered a development alliance with Banco Nacional de Mexico in 1992. The number three bank in Louisiana, Premier Bancorp, was purchased in 1996. A year later, it added Liberty Bancorp, based in Oklahoma City. With the purchase of First USA in 1997, Banc One became the third largest credit card issuer behind Citicorp and MBNA.

Bank One formed after a $29 billion merger in 1998 between Banc One of Columbus, OH and First Chicago NBD. The combined Bank One was 40% owned y First Chicago stockholders and 60% owned by Banc One, to become the fifth largest bank in the nation. (Later dropping to sixth)
In 1991, Banc One’s annual report announced the slogan “Building share-holder value by sticking to the nuts and bolts”, with a focus on having a good understanding of the ‘nuts and bolts’ of the business. The strategy developed was straightforward and simple to continue the success of the organization. The 1992 annual report, almost identical to the prior year, cited three basic strategies:
Serving retail and middle market customers through community banks, with operation on local autonomy, plus a strong central financial and credit controls, enhancements of retail products, competitive advantages, operating efficiencies and the generation of nontraditional bank revenue source, technologies , bank acquisitions to be treated as ongoing lines of business, with a focus on pricing and management disciplines.

Banc One had many challenges implementing the above strategies. Once having overcome the major tasks profits would increase. With opportunities, risks are also involved, with risk a strong management system must be in place to succeed. Banc One overcame acquiring problems by implementing “Uncommon Partnership philosophy”. In this area Banc One would decentralize the people side of the business, centralize the paper and electronic transactions, and operations would occur under a ‘superb financial management system’. Banc One also focused on the customer needs, with strong attention given to ‘total quality management’. Banc One understood that measurement of an organizations competitiveness returns to the human and financial capital in place. Human capital was a focus with the decentralization of people. Financial capital was based on the Equity, according to McCoy.

“As to financial capital, equity is a prime determinant of growth, even survival, in the new banking environment. Banking organizations with the strongest capital positions have the most options as the industry continues to consolidate… they will be the survivors.”

An extremely important element to the success of Banc One was the “McCoy factor.” The bank was able to trace its roots back to 1868, with three generations of McCoy’s molding the policies and practices of the bank. In the three generation of McCoy’s in charge, Banc One began to invest in marketing, research and technologies, which would bring the organization ahead of the competition. As government regulations also changed, John G. McCoy expanded into other states successfully. As Banc One acquired banks, the local autonomy and keeping the existing management team in place was a primary focus. Systems were in place to assess these new “uncommon partnerships” by peer banks. These systems caused a great deal of “healthy competition” between the affiliates. Awards systems were implemented, a corporate ethics program was executed, new ways of communication were presented and many other systems of keeping employees involved and interested. A share and compare system was formed. Banc One also relied on its powerful financial control system, MICS to provide key operating information to assist with performance targets at all levels of the bank.

The uncommon partnership was a strategy that remained unchanged since the beginning of Banc One’s time. Banc One focused on successful banks with proven records of accomplishment, with the policy of not overpaying, no hostile takeovers, and make no single acquisition with assets greater than one-third Banc One’s size. In case of failure, it will not affect the bank dramatically.
Banc One’s 10 year average performance from 1983-1992 was the perfect testament to their success. The below table includes ratios in comparison to the industry (competition).
Average 1983-1992 Banc One Median 25 largest U.S. Banks Banc One Rank
ROA 1.38% .67% 1st
ROE 16.92 11.97 1st
E/A 7.97 5.62 1st
Efficiency Ratio 65.00%.

Bank One was formed after a $29billion merger in 1998 between Banc One of Columbus, OH and First Chicago NBD. Banc One had a large retail operation located primarily in the Midwest and Southwest. First Chicago NBD’s strength lay in its long history of corporate lending to medium sized manufacturers. 40% belonged to First Chicago stockholders and 60% owned by Banc One. With this merger, McCoy did something he had never done before, merged with an equal, thus causing the movement of the Bank One headquarters to Chicago. McCoy left the bank after both sides battled as to who was in charge and who should manage the business, as a result regional practices prevailed; resulting in the stock losing half its value in two years.

In 2000, Bank One’s board asked Jamie Dimon to take over as CEO. He inherited a badly managed, poorly organized bank. Dimon invested $56 million of his own fortune into the bank, and cut 8000 jobs. Dimon replaced 12 of the 13 top executive managers at the bank. Today Bank One is the sixth largest bank holding company in the U.S., with assets over $260 billion. The bank has 74,000 employees at 2,000 branches in 14 states.

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