First Union Corp. was one of the most ambitious banks in retail investments even before it launched its bold invasion of the Northeast.
And now that the North Carolina banking powerhouse is preparing to merge with First Fidelity Bancorp, its mutual funds and other investment offerings seem destined for even more prominence.
The megamerger announced last week establishes First Union in some of the nation's most affluent markets, gives the bank a crack at recruiting battalions of First Fidelity customers as investors, and heats up an already lively market.
"We now have a big gorilla in the backyard," said Joy P. Montgomery, president of Money Marketing Initiatives, Morristown, N.J. "They'll be a formidable competitor in the area of investment products."
The merger, which is expected to close by early next year, will create a $123 billion-asset banking company that sprawls along the Eastern Seaboard. First Union's proprietary mutual funds would grow to $9.5 billion of assets under management, tied for fifth place with Banc One Corp. among bank managers of mutual funds. And First Union would climb to 15th place in trust assets, with $38 billion under administration.
First Union, which has made no secret of its desire to compete with the giants of the mutual fund and money management industries, said the planned merger with First Fidelity significantly will strengthen its hand.
"We're gaining not only more territory, but also a broad base from which to build our business," said Donald A. McMullen Jr., a First Union executive vice president who oversees the company's entire retail investment business.
Over the past three years, First Union has pumped substantial resources into investment products.
With the firm backing of chairman Edward E. Crutchfield Jr., First Union has trained 2,400 branch employees as brokers; acquired a $3 billion mutual fund family, the Evergreen Funds; and tested interactive video technology for delivering mutual funds to customers.
But though First Union's investment business has taken off, it hasn't begun to soar. For one thing, it has saturated some of its long-held markets and is in need of fresh prospects.
That's where First Fidelity comes in.
The New Jersey-based bank's branch network covers five states, and takes in the affluent New York, New Jersey, and Connecticut suburbs of New York City.
First Union stands to gain not only a new audience for its investment services, but also an experienced and established trust and private banking staff in First Fidelity.
"They can leverage that trust and private banking experience," said David Ross Palmer, a New York-based consultant who advises banks on marketing to the affluent. "If you went in there cold, you would have significant trouble establishing yourself."
First Fidelity has been making a big push into the affluent market since 1992, when it began pursuing an integrated private banking strategy that combines traditional trust department functions with banking and investment services.
It has also done some acquisitions in private banking. For instance, First Fidelity bought Pitcairn Trust, a Jenkintown, Pa., bank that caters to exceptionally wealthy people, in early 1993.
By contrast, First Union's share of the trust and private banking market "has been dropping like a stone in recent years," according to Mr. Palmer.
But First Union has built considerable muscle in the mutual fund arena. Its Evergreen Funds, which currently hold $7 billion of assets, will be the centerpiece of the combined banks' investment product offerings.
Most of the $2.5 billion in First Fidelity's FFB Funds and Lexicon Funds will merged into similar Evergreen portfolios, said First Union's president, John R. Georgius.
Still to be decided on is the fate of First Fidelity's investment sales force, currently run by Marketing One, Portland, Ore.
First Fidelity officials said it is too soon to know what changes, if any, will be made in the company's arrangement with Marketing One. But if First Union's aggressive expansion in other parts of the country is any indication, chances are the program will be run out of its headquarters in Charlotte, N.C.
Marketing One's senior vice president, James M. Truax, said he had consulted with First Fidelity officials but that no firm decisions about who will retain control have yet been made.
"We have a good program, and it's gotten better month over the month," he said. "Whatever the two banks do is out of our control."
