Chase, Chemical Downplay Loss of Customers

Executives from Chase Manhattan Corp. and Chemical Banking Corp. said they expect to lose fewer customers than originally anticipated when the two banks merge at the end of this month.

At a meeting with analysts last week, officials from the two banks said the combined institution would also gain from size and diversity beyond what is expected in both the wholesale and retail sectors.

On the retail side, the executives said the new Chase will have a dominant position in the New York City metropolitan market, with more than $200 million in deposits per branch, far exceeding analysts' estimates of $50 million per branch.

On the wholesale side, officials said the new Chase will be able to provide a more diverse range of services to corporate customers in areas like emerging markets, risk management and financial advice for specialized industry sectors.

Chase and Chemical would form the largest U.S. bank, with $300 billion in assets.

Walter Shipley, who will be chairman and chief executive of the combined institution, said the companies found there was "less overlap in our respective client bases and greater opportunity to leverage our strengths, particularly in the global bank and in global wholesale activities."

In surveys conducted by the company, he added, most corporate customers indicated they would conduct more business with the new company, not less.

Analysts predicted that Chase and Chemical will lose a combined $270 million in the first quarter year, or 65 to 70 cents a share, as a result of merger-related costs of $1.9 billion, up $400 million from the initial forecast.

However, Mr. Shipley also increased his estimate for annual operating savings to $1.7 billion from $1.5 billion. After the initial merger-related charges, he said, the bank hopes to achieve per-share earnings growth topping 15%, an efficiency ratio in the high 50% range, a 5% to 7% increase in operating revenues, and a 17% return on common equity.

Analysts said they saw little in the revised figures to change their forecasts for first-quarter operating earnings of $1.60 a share.

"If there was anything different this time, it was a greater sense of confidence in their ability to grow the revenue base," said Raphael Soifer, a banking analyst with Brown Brothers Harriman & Co. "Other factors being equal, they'll be a much more formidable force in the market."

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