Chemical Says Tech Plans on Track

Trying to ease Wall Street jitters over progress toward their impending merger, Chemical Banking Corp. executives said last week that plans for back-office consolidation with Manufacturers Hanover Corp. are on schedule.

At a briefing for analysts, executives said many decisions have been made regarding which computer systems the merged institution will use.

But they also said no consensus had been reached on common consumer banking systems. These would play a critical role in realizing the cost savings at the heart of the merger plan.

Analysts said that even if the banking companies make their decisions before yearend - which they have promised to do - the new Chemical will have a hard time completing systems conversions by the middle of next year, when the two lead banks are scheduled to merge.

June 30 Deadline

Chemical and Hanover have promised the Federal Reserve Board, which is expected to approve the merger, to combine their lead institutions by June 30.

Deciding which systems to keep and which to discard is just the first step in the conversion process, consultants said. The real work comes in converting to a single system and modifying other downstream systems that share information with the new system.

Systems conversions of the size and scope that Chemical and Hanover face can take from six months to a year, technology consultants said. The banks have just a little more than seven months to meet their deadline.

"They'll have to pull out all the stops to get it done in the time frame," said George Rusznak, head of the banking practice at the consulting firm SCS/ Index, Los Angeles. "In the Wells Fargo-Crocker merger, they achieved most of their conversions in nine months, and that effort was driven very hard."

Decisions Hang Fire

In the meeting with analysts last week, merger team executives said that, of the four computer systems that run the banks' retail banking operation, one has been chosen, which they did not specify. The banks have not decided which demand deposit, branch marketing and sales support, or home banking systems the new Chemical will use.

The demand deposit system handles updating and maintenance of checking accounts.

Checking account systems are critical because "that touches the customer," said Mr. Rusznak. "Plus, much of the expense reduction opportunity is the retail banking channel, and the systems will certainly enhance or prevent the bank from capturing some of those benefits."

John Sponholz, Chemical Bank's chief financial officer and merger coordinator, said the bank expects to decide on retail banking systems about Dec. 10.

Jobs May Be an Issue

Sources said that both banks have invested heavily in their respective retail banking systems and that that may be slowing decision making. Systems transition teams may be lobbying to keep their own systems, in the interest of keeping their jobs.

Chemical has a system that runs on Digital Equipment Corp. computers, which it built itself. Hanover, on the other hand, began converting from NCR Corp. computers to International Business Machines Corp. mainframes and is installing retail banking systems from Systematics Financial Systems Inc.

Mr. Sponholz said last week that 25 of 32 major computer systems for the new bank had been chosen.

A single trading system, a single cash-management system, and a single funds transfer system have been chosen, Mr. Sponholz said. Most of the global banking systems and all of the credit card, national consumer, middle-market, and private banking systems have also been designated.

Bank executives declined to reveal which bank's systems had won out in each case, although sources close to the merger said Chemical's cash-management system - called Chemlink - was chosen over Hanover's software.

Table : Moving Down The Merger Path Status of back-office systems to be converted in Chemical/ Hanover merger Number of systems to Decisions be converted madeGlobal banking 7 6

Corporate banking/ trust 4 4Retail card/ 4 4

national consumerConsumer banking 4 1Staff systems 4 2Infrastructure 3 3Total 32 25

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