B of A Blitz to Put 50 Banks in Chicago Groceries

Six months ago, BankAmerica Corp. had no retail network in Chicago.

Now the nation's third-largest bank says it will have 50 supermarket branches operating in the area by yearend.

The San Francisco company is trying to prove it can build a consumer bank through supermarket offices, automated teller machines, and telephones.

"I think they can make a big splash with relatively low expenses," said Rockwell F. Clancy 2d, executive vice president of the Bank Administration Institute.

The $239 billion-asset company, which entered Chicago two years ago with the acquisition of Continental Bank Corp., opened its first four in-store branches early this year. Since then, it has added five in-store branches, and another three were scheduled to open yesterday.

BankAmerica is opening the branches under its thrift, Bank of America FSB. The branches are in Jewel-Osco stores, where BankAmerica has also installed 170 automated teller machines.

Jewel, Chicago's largest grocery store chain, could turn out to be a great partner for BofA, because of its wide geographic reach.

But the bank would still be faced with taking deposits and cashing checks with a small staff that also would be trying to drum up lending business, said John Garnett, president of Atlanta-based International Banking Technologies, a supermarket-banking consulting firm.

BankAmerica plans to have as many as four staff members at each branch, but sometimes only one or two employees will be on duty.

BankAmerica has also agreed to perform check-cashing services for Jewel customers, which could be distracting to business, Mr. Garnett said.

Michael DeVico, chief executive of BankAmerica's Midwest retail division, said a generally positive customer response and higher-than- expected loan and deposit growth in the initial Jewel branches convinced BankAmerica to open additional offices.

Banking competitors in the Chicago area had a decidedly cool reaction to BankAmerica's announcement. First Chicago NBD Corp. has been increasing the number of its supermarket locations, but said BankAmerica's moves had little to do with it.

"We view supermarket branches as complementing our existing branch system," said Thomas Kelly, a First Chicago spokesman.

St. Paul Bancorp. had a similar reaction. "Competition is nothing new to the Chicago market," said Maryellen Thielen, a St. Paul spokeswoman. "We don't plan to change our strategy."

St. Paul had the largest number of supermarket branches in Chicago until First Chicago added branches. First Chicago, which will have 25 supermarket branches by yearend, has agreements with three grocery chains, including Dominick's, the second-largest in the market.

Robert Evans, a vice chairman at Minneapolis-based TCF Financial Corp., said his company has been successful with 12 Chicago supermarket branches. TCF will open new branches as its supermarket partner, Cub Foods, opens new stores in the area.

It doesn't take long to determine whether grocery store banks are going to be profitable, said Mr. Evans. "They make money faster than regular branches."

A traditional branch can take four to five years to turn a profit, while a supermarket bank can become profitable in 18 months, Mr. Evans noted. Because the overhead expense is so low on supermarket locations, they can be quite profitable even with a small volume of deposits, he added.

Stanley Calderon, chairman and chief executive of Bank One Chicago, said BankAmerica must persuade customers to move their accounts to its branches. And that won't be easy, he said.

BankAmerica's Midwestern effort is part of a nationwide banking trend. According to International Banking Technologies, there are 3,700 supermarket branches nationwide, compared with 326 just 10 years ago.

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