In Consumer Banking, Potential Partners Are Complementary Equals

On the consumer banking front, the pact between First Chicago Corp. and NBD Corp. certainly lives up to its billing as a merger of equals.

Each company has something solid to offer the other in key fee- generating businesses. First Chicago is an acknowledged powerhouse in credit cards, while NBD is near the top of the pack in investment services.

Combined as First Chicago NBD Corp., with $120 billion of assets, the bank should be "a very strong, formidable competitor in the Midwest," said Anne Morgan Moore, president of Synergistics Research Corp., Atlanta. "The broader the product line you're able to offer the consumer, the better you're able to cement your relationship with them."

The deal gives a lift to First Chicago's already substantial credit card business. The combined entity will boast $13.8 billion of outstandings, and will remain the fourth-largest card issuer, behind First USA Inc. and ahead of AT&T Universal Card Services.

NBD's $750 million portfolio of credit card loans is icing on the cake for First Chicago, which brings $13 billion to the match.

The merger gives the card business "a nice way to grow," said Robert B. McKinley, president of RAM Research Corp., Frederick, Md. "It's hard to find growth through marketing anymore unless you're doing something extraordinary."

Salomon Brothers analyst Thomas P. Facciola said NBD will take advantage of First Chicago's credit card marketing muscle.

"NBD's going to scrap what they have and put it all into First Chicago's," he pointed out, "and that's like a quarter of production for First Chicago."

Still, there will be some issues to sort out on the card front.

First Chicago is a loyal Visa U.S.A. bank with a presence on the board of directors, while NBD has long been a big MasterCard International bank, and an early supporter of MasterCard debit programs.

Last year, First Chicago converted its automated teller machine off-line debit cards to Visa products. A spokeswoman pointed out that First Chicago NBD will continue to issue both brands.

Although NBD executives have grabbed some of the top jobs in the combined company, First Chicago's highly regarded credit card chief, Scott P. Marks, also snared a plum assignment. He has been promoted to vice chairman of the new company, but remains chairman of FCC National Bank, First Chicago's credit card bank.

Though some analysts believe First Chicago is overweighted in credit cards, Mr. Marks' promotion is seen as an endorsement of his leadership and an indication that credit card operations will remain important after the merger.

While First Chicago clearly has the edge in credit cards, NBD appears to have a firm upper hand in investment products.

NBD's Woodward family of mutual funds holds $6 billion of assets, mostly in retail funds. First Chicago's Prairie Funds are a little under half that size, with $2.8 billion of mostly institutional assets.

NBD also towers over First Chicago in terms of its brokerage sales force - it fields 120 brokers, versus 56 at First Chicago.

The combined mutual funds business should have greater clout with customers and competitors, observers said. "This gets them toward the $10 billion mark," where marketing muscle and sustained profitability really kick in, according to Dennis Dolego, partner with Financial Research Co., Chicago.

But some heavy work lies ahead. For one thing, Richard A. Davies, president of First Chicago Investment Services, expects the fund families to be merged. "Finding a way to get the most out of both fund families would make sense," he said.

The newly combined bank will also be a titan in private banking and trust.

In terms of both trust income and managed trust assets, the First Chicago NBD Corp. will enter the top 10, with about $70 billion of assets under management and $357 million of trust income.

Sources praised both banks' ability to service their wealthy clientele. First Chicago, in particular, gets kudos for recently having integrated its personal trust and private banking operations into nine Chicago offices under the leadership of William J. Hagenah.

The integration of private banking and trust has been a major trend in the industry in the last few years, and observers are wondering whether First Chicago's method will win over NBD's more traditional one.

Some community bankers said the merger presents opportunities to grab new business from individuals, as well as small businesses.

"Whenever a much larger competitor goes through some changes, there will always be some people coming in the doors," said Calvin R. Myers, president and chief executive of $547 million-asset Merchants National Bank, Aurora, Ill.

However, James M. Roolf, senior vice president of $3 billion-asset First Midwest Bancorp, Itasca, Ill., said larger customers could be lured away by the expanded resources of the new $120 billion-asset institution.

This article was reported by Mickey Meece, Howard Kapiloff, Cristina Merrill, William Plasencia, Karen Talley, and Barbara F. Bronstien. It was written by Debra Cope.

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