BALTIMORE - A top banking analyst, speaking here last week, lauded the cutting-edge efforts of some banks and encouraged the industry as a whole to "radically reengineer" through technology.

In his keynote address at Bank Administration Institute's home-based financial services conference, Thomas K. Brown of Donaldson, Lufkin & Jenrette highlighted the value of interactive financial services in improving banks' overall value to shareholders as well as consumers.

He implored banks to make greater use of new data base marketing applications and alternative delivery channels to better understand and reach customers.

Mr. Brown said that bankers are "witnessing a period of historical change as the banking industry becomes a financial services industry."

But the analyst said that bankers still have hard work ahead if they intend to survive in this environment of transition and consolidation.

"The companies that don't change dramatically over the next five years will look very much like (Microsoft Corp. chairman) Bill Gates' dinosaurs ... very much like savings and loans look today," he said.

Mr. Brown pointed to several factors precipitating this sea change: modest growth coupled with low inflation; the aging and better-educated population; and, perhaps most important, the new retailing environment being bred by the rapid development and dropping cost of consumer hardware and software.

But from there, Mr. Brown, ranked the top industry analyst in a recent American Banker survey of bank executives, went on to detail the leaner, faster, more targeted operations that banks need to become in order to compete in this new market.

He encouraged banks to beef up their sales efforts - singling out Wells Fargo & Co. as "the one bank I know that's really good at selling" investment products to its customers.

Stressing value over volume, he urged banks to focus on the segment of customers - often the minority - that provide the greatest profit by using their vast stores of data to help differentiate and customize products and pricing.

By exploiting their own information, he further reasoned, banks might also investigate the potential of out-of-market lending - a prospect that "scares many CEOs," but has proved quite lucrative for banks like Wells and Signet Banking Corp.

He also applauded Citicorp's recent move to drop fees on its electronic banking services, saying it has increased the bank's number of alternative- delivery users fivefold in just a few months. He predicted that more banks would use incentives like this to move customers off the teller line.

Mr. Brown, who has derided some acquisition-hungry banks for their high purchase premiums, added that "a bank of any size can survive in the consolidation business."

As an example he offered Centura Banks Inc. a $4 billion asset North Carolina company that partnered with Microsoft Corp. and Intuit Inc. and has built an impressive telephone banking center.

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