Bank One adding conditions to loans
Bloomberg News Service
CHICAGO — Bank One Corp., the No. 5 U.S. bank, will stop lending to 318 companies and notify 636 others it might drop them or extend less credit if they don't hire the bank for other business, according to an internal bank document.
Bloomberg News Service
The crackdown, which involves half of the Chicago-based bank's 1,828 corporate customers with more than $250 million in annual sales, is part of a drive by Bank One and other lenders such as Bank of America Corp. to boost income by using lending muscle to vie for cash management, asset management and securities underwriting business.
Customers come and go from the Bank One branch in Wilmette, Ill. Bank One Corp. has announced a crackdown on lending that involves half of the bank's 1,828 corporate customers.
"All the banks I work with want that ancillary business," said Joe Cooper, treasurer of Big Lots Inc., one of the companies Bank One dropped after the largest U.S. chain of closeout stores balked at a demand it award a "significant" increase in investment banking business to the bank. "A few years ago, they were happy with just having a part in the loan."
Jamie Dimon, Bank One's chief executive, said last month that he plans to cut as much as $20 billion of the bank's loan exposure by getting rid of bad loans and unprofitable borrowers. Dimon has said 15 percent to 20 percent of the bank's corporate borrowers were loan-only customers.
Dimon was not immediately available for comment. Spokes-man Thomas Kelly declined to comment on the document.
Bank One trimmed large loans by $3.9 billion and sold $599 million in loans during the first quarter, including $375 million that were flagged as unlikely to be paid. Dimon said last month that effort is continuing, because the bank expected losses from commercial loans to increase in the second and third quarters as it sells more of its loan portfolio and writes off bad debt.
Bank One "told me, 'We've been in your loan for a while and now it doesn't meet our strategy so we'd like to be replaced," ' said Gilbert L. Danielson, chief financial officer of Aaron Rents Inc., another borrower Bank One has dropped.
"We were out of their geographical reach and the loans didn't have the fee income possibilities they wanted," Danielson said.
