A merger of KeyCorp and National City Corp. would create an Ohio banking giant with $164 billion of assets and $93 billion of deposits, but it would still be far behind Bank One Corp. in terms of Midwest dominance.

Rumors of such a combination caused both companies' shares to surge this week.

The rally continued Thursday, when KeyCorp's stock closed at $36.9375, up $2, and shares of National City ended the day at $72.125, up $1.

A marriage of the two companies, both based in Cleveland, would form the eighth-largest U.S. bank, just behind San Francisco-based Wells Fargo & Co., which has $201 billion of assets.

But it would still be small when compared to Bank One, of Chicago, which boasts $250 billion of assets and deposits of $154 billion.

"A combination of KeyCorp and National City would look like a national franchise, but it would not have the market share of one," said Diana Yates, a bank analyst with A.G. Edwards.

"There would be nothing cohesive about a combination between the two companies," added Nancy Bush, of Ryan Beck & Co.

"It would be a big amorphous mass."

Analysts pointed out that a combined KeyCorp-National City would likely be asked to make substantial divestitures by the Justice Department, because of the two banks' substantial overlap in Cleveland.

KeyCorp has $12 billion of the city's deposits while National City has $7.5 billion. A merger of the two would give the company 45% of the Cleveland market, Ms. Yates said.

She predicted that if the two banks did get together, "they would have to divest at least $5 billion" of deposits.

KeyCorp currently ranks first in Ohio market share with $17 billion of deposits. National City has $15.8 billion of the state's deposits.

A combination of the two would leave No. 2 ranked Fifth Third Bancorp of Cincinnati in the dust with $15.5 billion of deposits. Bank One would rank third, with $15 billion.

The idea of a KeyCorp-National City merger has gained momentum in recent weeks, since Fleet Financial Group announced its deal to buy BankBoston Corp. March 15.

Like that in-market transaction, which would also require large divestitures, one bank-in this case, KeyCorp-brings a strong retail franchise, while the other boasts depth in commercial banking.

National City and KeyCorp also have complementary business lines in trust, brokerage services, and investment banking.

But Standard & Poor's analyst Stephen Biggar argued that such a deal would not offer the kinds of advantages that guarantee survival in the rapidly consolidating banking industry.

"Bank One's size is its greatest advantage against such a combination," he said.

"It's product set offers a greater marketing advantage. Bank One is a category killer in credit card operations."

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