1st Union CEO Says Merger Wave Will Grow

The consolidation wave will engulf specialized financial services companies - credit card issuers and mutual funds included - as much as it does small and tradition-bound banking institutions, First Union Corp. chairman Edward E. Crutchfield Jr. said Wednesday.

Fresh from his agreement to acquire CoreStates Financial Corp. of Philadelphia for almost $17 billion, Mr. Crutchfield said in a speech that technology and other trends are forcing even companies that seem large to reach for greater scale and scope if they want to survive.

Barnett Banks Inc., recently decided to sell out to NationsBank Corp. because of technology expenses and challenges, Mr. Crutchfield told the opening session of the Bank Administration Institute's Retail Delivery Conference.

He suggested that monoline companies and those that handle credit cards, auto loans, and other fields will come to the same conclusion.

"For credit card companies, it will be very difficult to stay the course," Mr. Crutchfield said. He noted that Bank One Corp. has acquired a leader in that business, First USA Inc., and Fleet Financial Group is doing the same with Advanta Corp.

"Every one will be gone in three, four, or five years," he predicted, though he did not name the obvious suspects, MBNA Corp. and Capital One Financial Corp.

He called Merrill Lynch & Co. the most formidable nonbank competitor but said First Union can now do anything that Merrill does.

Mr. Crutchfield predicted that the number of banking organizations will decline from 8,000 to 2,000 within 10 years.

The pack would be led by 10 to 15 dominant national companies, he said, and many of the rest would survive only by being highly focused on niches as private banks are.

"I don't like bigness, I grew up in a small town," Mr. Crutchfield said. "But they don't pay me to be nostalgic."

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