The abrupt retirement announcement of William F. Zuendt, Wells Fargo & Co.'s technology czar-turned-president, marks not only a changing of the guard at the San Francisco-based bank, but also arguably signals an incoming wave of tough times for a bank that has grown accustomed to smooth sailing.

Until its merger with First Interstate, many U.S. banks suffered from what could be termed "Wells Envy." No surprise; for years, Wells Fargo appeared to be in a class all its own, outperforming other banks by dramatic margins. Stringent cost-cutting initiatives, aggressive investment in technology (overly ambitious, by some accounts) and an almost militaristic approach to the marketplace translated into tremendous shareholder value. So much so that the institution came to epitomize banking's most powerful-and profitable-force.

Indeed, at a time when many banks were struggling with the electronic distribution of products and services, Wells Fargo marched headlong into the Electronic Age. In retail banking circles, talk of the Internet and smart cards always drew mention of Wells Fargo and its "evangelist" position on the issues. The bank's strategy as an early adopter of retail banking technology: Be first and drive market demand.

For a time-pre-First Interstate takeover-Wells Fargo flourished, becoming the retail benchmark by which all other banks-save for Citibank- were measured.

Ironically, Zuendt-widely credited as the man whose business and technological achievements were the linchpin of Wells Fargo's outstanding performance-may be taking the fall for the bank's current merger-related woes. For starters, Wells Fargo underestimated the challenges associated with First Interstate's significant corporate business. Add to that the bank's far-reaching, product-centric culture, versus that of First Interstate, which was relationship focused, and things began to crumble.

By the time Wells Fargo's senior management realized what was before them, the slide had already begun. The bottom line: Bank officials realized that they were losing revenue faster than they were cutting expenses- something that wouldn't go over well on Wall Street. While bank officials anticipated losing total revenue in the neighborhood of $100 million, according to industry insiders, they were ill-prepared for the revenue losses in the corporate business. And losses continue.

While cost reduction and reorganization on the retail side of the house are going well, sources say that the bank will have to work to regain its footing in light of the merger-related fallout in its corporate business.

In all, the price that Wells Fargo will pay to digest the First Interstate merger is arguably a hefty one. Speculation is growing that Zuendt became the "scapegoat" for what many perceive to be an integration nightmare. Zuendt's premature departure, coupled with the bank's declining earnings performance, could be a sign of what's to come. Rumor has it that deeper cost cutting measures are underway-even extending to once-protected areas like Dudley Nigg's direct distribution group.

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