the fiercest battles are taking place in the data processing and operations areas. Wells Fargo & Co., has argued that its "open-loop, distributed architecture" gives it a systems advantage over competing bidder First Bank System Inc. and its "hub-and-spoke" computer architecture. First Bank System has responded by calling attention to its technical strengths, which include experience in consolidating the operations of acquired banks and the compatibility of its computer systems with those of First Interstate. Yet despite the debate and the technological differences separating them, the banks give similar estimates of the cost savings they could realize from data processing and operations. The details were laid out in presentations to analysts. Wells Fargo told analysts it would trim $110 million, or 51%, of First Interstate's budgeted data processing expenses of $214 million, within 18 to 24 months. First Bank System said it would cut $83 million, or 39% of data processing expenses. In operations, Wells Fargo said it would cut expenses by $123 million, or 28% of First Interstate's projected 1996 expenses of $439 million. First Bank System's estimate was $110 million, or 25% of First Interstate's budget. "Their numbers are a little higher than ours, but we're not arguing with them," said Philip G. Heasley, vice chairman of the product group at First Bank System. "All our numbers are referring to the first 18 months. I think they can take out 51% of expenses, though whether it's by the end of the first 18 months or not is debatable. They will certainly be able to do it by 30 months," as would First Bank System, he added. Rod Jacobs, chief financial officer of Wells Fargo, said First Bank System's claims about the relative ease of conversion are "irrelevant," because Wells thinks it can do better on the systems front in the long term. Wells' strength, he said, is its open, distributed computer architecture, which enables rapid product development and does not require big investments in mainframe capacity. Wells has pledged to cut total expenses by $1 billion, or twice the amount promised by First Bank System. The biggest discrepancy between the companies' projected cost savings relates to occupancy expenses in California, where Wells would be expected to close hundreds of branches. Wells says it can take out $170 million, or 43%, of First Interstate's occupancy expenses of $394 million. First Bank System, which has far fewer branch overlaps, projects savings of only $39 million, or 10%, in occupancy expenses. Wells executives also said the bank could cut much more staff in the retail, commercial lending, and trust lines of business. Most retail staff reductions could be accomplished through branch closings. Wells also would reduce the number of commercial lenders by 55% (compared with First Bank System's projection of a 10% reduction) and trust officers by 37% (compared with 10% by First Bank), according to Richard A. Zona, chief financial officer at First Bank System. First Bank System executives said that the large expense-reduction figures for these business lines would almost surely result in a loss of revenue as well. The banks issued similar cost savings estimates for the payments systems areas. "First Bank System did make a persuasive argument," said Joseph Duwan, an analyst at Keefe, Bruyette & Woods. "They don't have to prove their offer is better; they just have to prove that Wells Fargo's is not materially better." Observers said they did not think that either bank could claim superior system architecture. However, First Bank would be expected to have an advantage in terms of speed and cost of conversion. According to Robert Landry, a technology analyst at the Tower Group, Wellesley, Mass., Wells Fargo uses a Unix-based branch system that gives it slightly lower terminal costs than the personal computer-based systems running in IBM's OS/2 environment employed used by both First Interstate and First Bank.

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