Wells President: Merger to Be Seamless to Clients

The close of the Norwest-Wells Fargo merger next Monday will be only the beginning of the real test for executives from the two banks: the creation and integration of a unified banking and financial services organization.

In an interview last week, the new Wells Fargo's chief financial officer, Rodney L. Jacobs, detailed the first changes customers are likely to see-and exuded a confidence that they all will be positive ones.

"No one is approaching this with any jitters or worries that we are going to have problems," said Mr. Jacobs, the current Wells Fargo & Co.'s president, who is overseeing the integration process with his Norwest Corp. counterpart, Leslie S. Biller.

"We are approaching this very positively, and we are going to get this done seamlessly in the eyes of the customer," Mr. Jacobs vowed.

The first major changes are slated for markets where the two banks have overlapping operations, such as New Mexico, Arizona, Colorado, and the Texas cities of Austin and San Antonio. Branches in these areas are to uniformly display the Wells Fargo name by the end of 1999.

"Combining the companies from a customer standpoint in these states is going to be the highest priority," Mr. Jacobs said. "We can then present a common view to the customer and get on with marketing as one company, as opposed to having different ways of doing things in the branches and back offices."

He said those initial conversations "will become the model for the rest of the franchise."

The old Wells Fargo had well-documented problems with its 1996 acquisition of First Interstate Bancorp, which has become an example of how not to do a bank merger. Squeezing the integration process into six months caused back-office meltdowns and was a factor in significant customer defections. Mr. Jacobs said he is confident history will not be repeated.

"We didn't intend for that to be a learning experience, but there is no doubt that we learned a great deal from it," Mr. Jacobs said.

"They are definitely reflecting on First Interstate and looking at how not to repeat those mistakes," added Joseph K. Morford, an analyst with Van Kasper & Co.

Mr. Jacobs, Mr. Biller, and their charges will take a deliberate three years to meld Wells Fargo and Norwest into a single, San Francisco-based enterprise, now with $191 billion of assets.

But that does not mean they have been sitting on their hands. In several ways, Wells Fargo has already begun the business of operating as one.

When Norwest customers use a Wells ATM, they are greeted with a special screen and are not charged "foreign customer" fees. In addition, Wells branch employees have been referring customers to Norwest's mortgage and consumer finance units-a type of cross-selling that will continually expand as the banks coalesce, Mr. Jacobs said.

"In markets where Wells has operated exclusively-like California-the first things customers will see are broadening product opportunities," he said. Norwest's mortgage and consumer finance units will become Wells Fargo Mortgage and Wells Fargo Finance.

In Norwest branches, sign changes will be the initial signal of the conversion, though no date has been set for the switch, Mr. Jacobs said. Before the end of 1998, Wells will begin pushing its highly rated on-line services bankwide.

"Customers are going to see a lot of positives from the standpoint of a much bigger product offering than from either company on a stand-alone basis," Mr. Jacobs said.

They will also benefit from the unified corporate structure, Mr. Jacobs said. Wells Fargo's roughly 5,700 branches will be divided among five territories: the two home states (California, Minnesota) and three regions (central, southwestern, and western). Each will have its own manager. California, with the majority of the total deposits, is likely to be split further into separately run sub-regions.

Operating across the regional structure will be several "strategic business units," serving common functions such as back-office administration and product development.

"Local market ownership will be a little more formalized than it is at the old Wells Fargo, but at the same time we will maintain the strength we had from being very product and line-of-business focused," Mr. Jacobs said. "The regions will be able to focus on delivery to customers."

Despite the complexity Wells faces, Mr. Jacobs did not rule out additional acquisitions in the next three years. The bulked-up company may look to strengthen itself this way in insurance, mortgage lending, consumer finance, or money management.

The new Wells Fargo has a "pretty decent" market share in most of the 21 states where it has bank operations, Mr. Jacobs said. While there could be some "filling in" of geographical gaps, he said, the institution is less likely to buy banks until after Wells and Norwest are melded together.

"We have a very big integration to do and it wouldn't make sense to try to do smaller integrations at the same time," he said. However, he acknowledged that if the right opportunity arose, Wells would not ignore it.

"This doesn't mean we wouldn't do bank deals that we thought were important from a fill-in or an expansion basis," he said, "but if we do them, we'll have to justify the economics of letting them operate on their own for a while and not being integrated into the rest of the company."

Any such acquisitions might occur in states where Wells Fargo is fragmented, said R. Jay Tejera, an analyst with Dain Rauscher in Minneapolis. Texas, Wisconsin, and Colorado fit that description.

"Norwest has a long history of doing a double-handful of community bank acquisitions every year, and I expect that to continue," Mr. Tejera said.

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