Customers may not notice for at least two years that Wells Fargo & Co. and Norwest Corp. have merged. And that is just fine with chief executive officer Richard M. Kovacevich.

His approach is slow and steady, and the payoff comes from avoiding customer disruption, computer system disasters, and management blowups while reaping the benefits of size, Mr. Kovacevich said Friday.

"The best way to describe it is this is going to be a three-year effort," he said Friday in an interview with American Banker.

The new Wells Fargo, formed on Nov. 2, plans to reduce annual expenses by $650 million between now and 2001. But the full benefit may not be realized as the cuts are made, Mr. Kovacevich said. He and other Wells officials have been saying consistently that they will not cut expenses in a way that hurts revenue growth.

Based in San Francisco, the post-merger Wells Fargo is the seventh- largest U.S. banking company, with $200 billion of assets and 2,800 branches in 21 states, mostly west of the Mississippi River.

Mr. Kovacevich is clearly intent on maximizing the returns on that geography and the complementary Norwest-Wells business mix.

"We believe we're going to be the premier financial institution in the United States," he said.

The new company has been trying to quiet investor concerns about the conflicts that might arise between the former Norwest's high-touch focus and Wells' high-tech leanings.

Mr. Kovacevich called that "a healthy show-me attitude. But it's fair to say there is a greater understanding of the benefits" of the merger, which he described as geographic, product, technological, and strategic.

"People tell us we're doing pretty well for a company that supposedly had so many cultural differences," Mr. Kovacevich said.

He said he is hearing from analysts that Wells is "ahead of other companies" in the integration process. "And analysts tell us we seem to have fewer internal conflicts."

Beginning in September 1999, Wells plans to curtail merger-related computer conversions to make certain there are no year-2000 glitches. The company would then resume integration sometime after March 2000.

"Obviously, we want to do it sooner than later, but certainly we're not going to do something that's going to hurt the customer," Mr. Kovacevich said.

He said any shortfall in expenses would be made up for by "all kinds of opportunities we didn't forecast." That could include additional revenue, but analysts have also said Wells would benefit from lower taxes.

The new company will fall as much as $100 million short of its original $325 million merger-savings goal for 1999, according to analysts. Mr. Kovacevich refused to comment on specific numbers.

Savings from computer systems represented about one-third of the expense cuts as projected at the merger announcement last June.

The company could avoid a hit to earnings through a lower combined tax rate and investments in mortgage securities, said Ruchi Madan, banking analyst with PaineWebber Inc.

"Earnings disappointments are not very likely despite the potential delay" in savings, Ms. Madan said.

Lowering the cost-cutting target "doesn't mean they're not going to get there," said Ben Crabtree, an analyst with Dain Rauscher Inc. of Minneapolis. "It's a timing issue."

"I would say it's a calculated move," said Carla D'Arista, banking analyst at Friedman, Billings Ramsey & Co. "The near-term benefits of cost savings are far outweighed by the longer-term benefits of a smooth integration and the chance to gain market share in California."

Some analysts said they were more concerned about revenue prospects.

"There remains a challenge in getting some uplift, particularly in the old Wells Fargo," said Thomas Theurkauf, an analyst with Keefe, Bruyette & Woods.

"We think the states we're in will economically outperform the U.S. economy," Mr. Kovacevich responded. "We're in nine of the 10 fastest- growing states in the nation." Those states are Arizona, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, and Washington.

Mr. Crabtree, an early critic of the merger, said he is turning "less skeptical."

"Our view of the banking industry is less positive," he said. "But we've always said the time Norwest will shine is when conditions get more difficult."

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