Just two weeks after Bank of Montreal Corp. unveiled a 10-year plan to bolster Harris Bankcorp, its flagging Chicago affiliate, it received notice that the timetable may require dramatic acceleration.

In a single thrust, ABN Amro Holding this week grabbed a big chunk of the Chicago market when it agreed to buy Cragin Financial Corp., parent of Illinois' second-largest independent thrift.

The $500 million price tag equals two-thirds of what Bank of Montreal said it would invest in Harris over a decade.

And Amro, which will control $18.2 billion of assets in metropolitan Chicago, is but one of several competitors muscling in on the vast Chicago-area market. First Chicago Corp. is aiming to bolster its already dominant market share, and interstate rivals such as NBD Bancorp and Banc One Corp. are hungry to expand there.

"Bank of Montreal doesn't have 10 years to get the job done," said Michael Sammon, a banking analyst at Howe Barnes Investments Inc., a Chicago brokerage firm.

The Pressure Is On

The heightened competition intensifies the challenge facing Alan G. McNally, the Bank of Montreal vice chairman who is being dispatched to revamp the company's U.S. operation.

But Mr. McNally, who will arrive in September from Toronto, said Thursday he is unperturbed by ABN Amro's purchase of Cragin, and sees no reason to change his strategy.

"Big purchases may be the best option for others, but they certainly are not the best for us," said Mr. McNally, who said Harris could build a franchise far larger than Cragin's for the $500 million being spent by ABN Amro.

Goal: Triple Earnings

Mr. McNally will succeed B. Kenneth West as chief executive of Harris, which has $12.6 billion of assets. His mandate: to triple both earnings and branches at Harris, which has performed inconsistently since Bank of Montreal purchased it in 1984.

Though Harris sports the nation's 18th-largest trust operation, administering $160 billion of assets, it lags behind many Midwest banks in profitability.

Its return on average assets in the past four years has significantly trailed that of 29 of its midwestern peers, according to Keefe, Bruyette & Woods Inc. In the first quarter Harris' ROA of 0.90% contrasted with 1.25% for its rivals, widening from a 24-basis-point differential for all of 1992.

Bank of Montreal also has endured some frustrating years of waiting on the acquisition sidelines as a result of poor ratings that Harris received from regulators on compliance with the Community Reinvestment Act. The delay forced the company to cancel two purchases of smnall banks in the Chicago area in the past three years.

"Harris is a good resource that has been underutilized," said Roy Palmer, an analyst at Bunting, Warburg Inc. of Toronto. "Changes were overdue."

In a recent interview, Mr. McNally said growth is the cure for what ails Harris. His top priorities are retail and small-business lending -- areas that depend on a much larger grass-roots presence in Chicago.

Mr. McNally said he is intent on expanding Harris from 40 branches to 120. He also said that he must instill an aggressive marketing culture at the bank to get the job done.

But even in the best of circumstances, Bank of Montreal acknowledges it has a severe growth handicap -- Canadian banking laws that prohibit pooling-of-interest mergers in which a bank's stock is used as currency to buy another company.

Paying cash for purchases is costly because the goodwill -- the premium over book value a bank pays -- eats into Tier 1 capital and cuts reported earnings as it is amortized.

Nevertheless, Bank of Montreal will consider purchases in Chicago, said R.F. Adams, manager of investor relations. Ideally, he added, the burden of cash purchases will be eased by the cost-cutting and productivity gains Mr. McNally will achieve.

In the meantime, Mr. McNally is talking about building new branches from scratch -- an expensive and lengthy process.

Many analysts who follow Bank of Montreal support its midwestern ambitions, despite the obstacles. The company has few growth opportunities left in the highly consolidated Canadian markets.

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