Consolidations and mergers at financial institutions mean major people problems, but bankers still struggle with systems and back-office related issues as well.

That is the major thrust of Deloitte & Touche's fourth annual survey that queried all banks in the United States with more than $300 million in assets that had undergone recent consolidations.

Of the banks that responded, 24% said that merging back-office operations was their biggest challenge, while nearly 70% pointed to personnel or cultural issues as the major hurdles. Achieving financial objectives was cited as the least challenging issue in a consolidation.

However, in 1990, when the survey was last undertaken, only 15% of the respondents found back-office issues to be foremost in consolidations.

"You might think merging a lot of these back-office functions would be almost routine by now, but that isn't the case," said Larry Laminger, the Deloitte & Touche senior manager who conducted the study.

The respondents typically had been involved in a consolidation project within the past year. Nearly 64% said their project involved acquiring another institution, and almost half said their consolidation projects were completed in less than six months.

The top objectives of most consolidation projects, according to the study, were to achieve greater operating efficiencies, acquire new locations in desirable markets, and improve profitability.

Contrary to what might be expected, not every consolidation reduced the head count within an organization. In fact, staff levels actually increased at 6.3% of the responding banks and remained the same at an additional 22.9%.

"As banks merged, they tried to automate a lot of functions. But they haven't really seen the benefit in reduced staffing levels." said Mr. Laminger.

Almost all of the respondents reported they had taken steps to consolidate both auditing and data processing functions. Other likely candidates for consolidation included investments, loan review, credit rd administration, and treasury services. Fewer than half the banks surveyed consolidated revenue-generating functions:such as loan origination and business development.

Would the respondents do- anything differently next time around? Nearly 30% would try to communicate more effectively with those involved, while 15% would try to move their projects along more quickly.

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