LaSalle Bank Sparks a Duel

The Chicago hometown bank has been called a "fixer-upper." But it has become a bone of contention between bidders in the ABN Amro buyout

by Joseph Weber

LaSalle Bank, an outfit that Chicagoans have treated as a hometown bank since the Great Depression, has become an unlikely prize in the global battle to carve up the big bank's Dutch parent, ABN Amro Holding (ABN). LaSalle, No. 2 by deposits in the Chicago area, has emerged at the center of a tussle among banking giants including Royal Bank of Scotland and Britain's Barclays (BCS), as well as the U.S. retail banking powerhouse Bank of America (BAC) (see BusinessWeek.com, 4/25/07, "Can the Scots Spoil Barclays' ABN Deal?"). The Chicago bank is much coveted because it provides entrée into the Midwest banking market, which is potentially lucrative and strategically important to the bidders.

Yet LaSalle has been something of an underachiever, say analysts and even its would-be owner Bank of America. In a market ripe for consolidation, it has failed to grow its share of the market much in the last few years. Even though it might be a prize as a launching pad for growth for a retail-minded outfit that lacks a presence in the Midwest, LaSalle would need plenty of work from any acquirer. A "fixer-upper" is what independent banking analyst Bert Ely calls the Chicago bank.

Ripe for a Takeover

LaSalle has been outshone by more aggressive consolidators, both large and small. JPMorgan Chase (JPM), for instance, knocked the 80-year-old LaSalle off its perch as the leader in deposits in the Chicago area in 2001 and has kept its lead ever since. As of last June, JPMorgan boasted some $40 billion, or 15.3%, of deposits in the market. In comparison, LaSalle has just under $37 billion, and its share of deposits in the Chicago-area market has stalled at about 14% in recent years.

Meanwhile, the No. 3 bank in the market, Bank of Montreal's Harris unit, has been nipping at LaSalle's heels. Harris doubled its share of deposits in the Chicago market from just 4.6% in 2001 to a 9.53% share, or $24.9 billion, as of last June, the most recent figures available.

Still, LaSalle—a big name in Chicago because of its sponsorship of the Chicago Marathon and generous patronage of the arts in the city—is a proven moneymaker that could serve as a potent base for expansion throughout the Midwest. If Bank of America took over LaSalle, it would rebrand the bank as Bank of America, which has virtually no presence in the Chicago area, and goose its growth, promises BofA Chief Executive Kenneth Lewis. If Royal Bank won, it would fold LaSalle into its Citizens Bank operations, which are big in the Northeast, and similarly would try to expand the franchise.

New Offer May Scotch the Deal

The bank is at the center of the global fight for ABN Amro. The big Dutch banking combine cut a deal to sell itself to Barclays for about $88 billion and then reduce the total cost to Barclays by selling LaSalle to Bank of America for $21 billion. Now, however, a consortium led by Royal Bank of Scotland aims to upset that deal with an uninvited $98.6 billion takeover offer. The Scottish bank would keep LaSalle, while a couple of partners would carve up the remaining ABN Amro operations around the world (see BusinessWeek.com, 4/26/07, "The Making of a Monolith").

Investors have been enraged at ABN Amro CEO Rijkman Groenink's plan to sell LaSalle to Bank of America and sell the rest of the company to Barclays despite the more lucrative offer from the Royal Bank group. At an angry shareholder meeting in the Hague, Netherlands, on Apr. 26, one investor charged the stage and was sent back to his seat by guards. He threatened legal action to block the deal if the Dutch bank insists on going forward with it. Groenink said he would welcome a formal bid from Royal Bank for LaSalle or for all of ABN.