Coming up short of many market observers' and community activists' expectations, Banc One Corp. and First Chicago NBD Corp. have proposed to sell $1.3 billion of Indiana deposits to meet antitrust requirements.

In a filing Friday with the Federal Reserve Bank of Chicago, the merging companies asked the Fed and the U.S. Justice Department to take a broad view in their assessment of the level of competition-one that would let them retain more deposits than a straight market-share calculation would suggest.

The broader analytical approach would go beyond deposit market shares to factor in mounting competition from rival banks and thrifts and the battle for small-business lending.

Observers had expected Banc One to divest $1.9 billion of deposits in the Indianapolis area, the state's largest market. One analyst characterized the amount in the merger application as a "low-ball" negotiating point.

According to the application, Banc One would sell just $850 million in the Indianapolis market and $441 million in five other Indiana communities: Bloomington, Corydon, Lafayette, Lawrence County, and Rensselaer. The divestitures would include an undetermined number of branches and business loans.

"This is consistent with other bank mergers where they come in with low- ball strategies, knowing full well that they're going to have to divest much, much more," said Kenneth Thomas, a Miami consultant and expert on community reinvestment issues. He noted that NationsBank Corp. was required to double what it initially projected for Florida deposit divestitures to satisfy Justice Department concerns about its merger this year with Barnett Banks Inc.

Banc One indicated to the Fed that it is aware its divestiture plan does not literally meet requirements for reducing market concentration. But the application also noted the Fed has considered certain mitigating factors when approving other mergers.

The Columbus, Ohio, banking company is asking the Fed to do the same for its proposed $30 billion deal with First Chicago, which is slated to close in the fourth quarter.

Banc One wants the Fed to consider competition in Indiana from thrifts, start-up banks, and from the presence, albeit small, of larger regional companies such as Fifth Third Bancorp of Cincinnati, Huntington Bancshares of Columbus, and KeyCorp of Cleveland.

Ike G. Batalis, chairman of MetroBancorp, a $130 million-asset holding company in Indianapolis, said Banc One's proposal is "significantly lighter than I thought it would be."

Mr. Batalis acknowledged that Indianapolis is highly competitive but said the proposed selloff is too small. "Maybe it's put out as a cherry, and they'll let the regulators tell them what they want," the banker said.

First Chicago spokesman Thomas Kelly did not comment further, saying any questions about the divestiture could be answered by the filing itself.

When regulators look at the effects on bank competition of in-market mergers, they generally do not weigh competition from thrifts as heavily as competition from banks because thrifts are not as involved in the business market. Banc One asked regulators to consider two Indianapolis thrifts, First Indiana Corp. and Union Holding Co., major competitors because they both compete for commercial loans.

Banc One also said its divestiture is large enough to create at least a Top 5 competitor in Indianapolis.

Bankers with operations in and around Indianapolis were anticipating a chance to become No. 3 behind Banc One and Cleveland-based National City Corp. if the divestiture were larger. That could still happen if the Fed and the Justice Department force Banc One sell a larger chunk of deposits.

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