Bucking the trend toward layoffs and branch consolidation, $3.9 billion-asset Commerce Bancorp in Cherry Hill, N.J., has announced a five- year plan to create 3,000 staff positions and build 99 new offices.

The plan would double Commerce Bank's current staff size and bring its branch network to 175.

In addition, Commerce said it expects to increase its assets to $8 billion by yearend 2002.

These bold plans contrast sharply with the strategies at large banking companies. Just last week, $366 billion-asset Chase Manhattan Corp. said it would eliminate 4,500 positions in a restructuring aimed at cost containment and reinvestment in fee-generating businesses.

In February, $157 billion-asset First Union Corp. said it planned net layoffs of 1,300 employees and the closing of 172 branches as part of its $17 billion acquisition of CoreStates Financial Corp.

In a telephone interview last week, Commerce chairman, president, and chief executive officer, Vernon W. Hill, said other banks have it all wrong.

"Bank have this theory that the branch is dead, so they are forcing customers into electronic channels," he said. "Our theory is that no successful retailer forces its customers to do anything."

Commerce touts itself as "America's most convenient bank." Deposit- driven rather than loan-driven, the bank keeps longer hours than most other institutions.

Mr. Hill said the idea is to appeal to consumers who want high-touch banking. He cites statistics to support the claim that most consumers choose their bank on personal service rather than price.

"We do not compete on rate, we compete on convenience," he said. "Rate- sensitive depositors probably don't even go to banks."

Regardless of whether his theory is true, Wall Street analysts are pleased with the results. Commerce had profits of $40.3 million last year, up 43%. Analysts' consensus estimates put the company's 1998 earnings per share at $2.50, compared to 1997's $2.25.

"Branches are an integral part of what they do," said Marni Pont, an analyst at Keefe, Bruyette & Woods. "They really think of it as a retail business that just happens to sell banking products."

But expenses at Commerce are high-up 27%, to $137 million last year. Its efficiency ratio-the measure of how much a bank spends for every dollar it makes in revenue-is 60%.

"That's not so great, but they are investing heavily in growth," said David Stumpf, an analyst at A.G. Edwards & Co.

Mr. Hill, who has a background in real estate development, has had the bank in high-octane mode ever since he came on board in 1973.

Over the last five years Commerce has averaged 22% annual increases in deposits, to $2.7 billion on Dec. 31, and revenues, to $204 million last year. Assets have risen 15% a year.

Last year the bank added nine branches,in southern New Jersey and eastern Pennsylvania. This year it plans to add 15, entering new markets in central New Jersey and northern Delaware. Commerce said it plans to add another 20 branches each year through 2002.

"We are expanding in all directions," Mr. Hill said. "We focus on being the dominant bank in a given town."

Commerce Bank can pay for its growth because its focus is on gathering cheap deposits, analysts said. Demand deposits grew 21.7% in 1997, and interest checking grew 34.8%.

"While this is a declining business at many banks, Commerce Bank has developed cheap deposits as the core of its growth strategy," said Jacqueline Reeves, an analyst at Salomon Smith Barney, a unit of Travelers Group.

"We're the one bank company that believes this is a growth business," Mr. Hill said.

In the meantime, the executive likes to needle his rivals in southern New Jersey.

When Commerce shops for branch locations, it loves "to find ones right across from a CoreStates or a Summit branch," Ms. Pont said. "When you see their sign, it's like seeing the golden arches."

Commerce Bank is also interested in attracting disgruntled employees from CoreStates and other regional banks, Mr. Hill said. In the last few weeks, the bank has hired 10 CoreStates executives and has interviewed hundreds more, he said.

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