First Union Corp. said it has completed the systems conversion of five million former First Fidelity Bancorp. accounts.

The conversion was a significant step in First Union's plan to cut the merged banks' combined annual operating costs by 45%.

Charlotte, N.C.-based First Union and Lawrenceville, N.J.-based First Fidelity officially merged Jan. 2.

Because the deal joins two banks from different regions, First Union does not expect to save much from closing branches.

Instead, it wants to improve certain back-office operations in an effort to make more services available and improve the way they are sold.

"A big part of the financial logic of this merger is the increased product offering and the technology," said Austin A. Adams, First Union's executive vice president of operations.

First Union reduced the number employees at a former First Fidelity back-office from 290 to 80 on July 31 when it closed a Philadelphia data center. Processing from this location is now handled by a new data center in Charlotte.

The Philadelphia center was operated by Electronic Data Systems Corp., Plano, Tex., as part of a 10-year outsourcing agreement that First Fidelity signed in 1990. First Union will use the remaining value of the contract for other services or will pay EDS a fee to terminate the pact, said Mr. Adams.

In May and June, First Union converted about 700,000 accounts of former First Fidelity customers in New York, Connecticut, and Delaware. It converted about 4.3 million accounts from New Jersey, Pennsylvania, and Maryland the weekend of July 12.

Only 17 of 683 First Fidelity branches - all in Maryland - were consolidated in the transition, bringing First Union's total to 1,981.

"First Union has always been pretty aggressive in their efforts to integrate customer accounts of companies they buy, and I don't think they did anything different here," said Lawrence R. Vitale, an analyst at Bear, Stearns & Co. in New York.

"Branch cross-selling of other First Union products has been strong," said David R. Martin of Fitch Research in New York. "That may be due to implementing incentive pay for marketing and selling other products."

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