Thorny issues in banking's biggest merger; joining back offices faces big obstacles.

Thorny Issues in Banking's Biggest Merger

The full cost savings of the merger between Chemical Banking Corp. and Manufacturers Hanover Corp. are not expected to kick in for at least three years because of the complexity of combining the companies' incompatible back offices.

Of a total of $650 million in annual expense cuts, the new Chemical Banking Corp. hopes to squeeze out $200 million by eliminating redundant systems and operations.

Company executives say they hope to complete the process within three years, which is longer than the experiences of deal with bidders, analysts said.

Last year, said Ameritrust chairman Craig R. Smith, "our financial performance and our stock price were depressed. Our alternatives were not clear. We are now a much stronger institution, and our prospects are much improved. We can look forward to the future with confidence, whether as part of a larger institution or as an independent one."

National City Upbeat

A National City spokeswoman also expressed enthusiasm. "We welcome Ameritrust's decision to open discussions and look forward to sitting down with them soon to discuss the future for our institutions," she said.

Ameritrust earned 62 cents a share in the first six months of this year, compared with a loss of 93 cents in the same period last year. For all of 1990, the company lost $96.4 million, or $2.71 a share.

Once the premier bank in Cleveland, Ameritrust has been hurt by problem loans to real estate developers and highly leveraged borrowers.

Last year, in the midst of its difficulties, Ameritrust fended off a bid from National City. On May 2, National City renewed its bid, offering 0.66 of its shares for each Ameritrust share.

Offer Gets Richer

On Tuesday, based on National City's share price of $36.75, the offer was worth $24.26 to Ameritrust shareholders, at a potential cost of $904.9 million to National City.

That is up from $23 a share, for a total cost of $870 million, at the time the offer was made 10 weeks ago, because of the rise in bank stocks.

National City stand to reap large benefits from the elimination of an in-market competitor. Cost savings of $120 million annually have been projected.

Ameritrust's largest single shareholder is Cleveland businessman George Gund 3d, who owns 6.5%. Mr. Gund, former chairman of the Cleveland Cavaliers of the National Basketball Association, could not be reached for comment.

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