Like an earthquake and its aftershocks, last week's multibillion-dollar merger announcements on both sides of the U.S.-Canada border were but early consequences of a radical turn in continental drift.

The neighboring countries' financial systems may be fusing together, their institutions no longer hemmed in by a geographical boundary.

Cross-border mergers are surely on the minds of the bankers stirring up the current tidal wave, said Credit Suisse First Boston analyst Michael Mayo. NationsBank's pairing with BankAmerica, Banc One's with First Chicago NBD, and Canadian Imperial Bank of Commerce's with Toronto-Dominion Bank look like preliminaries to things bigger and multinational.

Recent and pending megamergers are steering the United States in the Canadian direction, leaving a likely handful of coast-to-coast banks and larger numbers focused on smaller markets and niches. The already close cultural affinity is carrying over to market and corporate structures.

"There is a marked relationship between the Canadian and U.S. economies, and that could be extended to their financial institutions," said John Carusone, president of Bank Analysis Center, Hartford, Conn.

Assuming the circumvention or removal of remaining legal limitations on foreign ownership of Canadian banks-a principle supported by the Canadian bankers-Banc One, Citicorp, and NationsBank are seen as likely to want to broaden their horizons.

"You have a new animal being formed, and these companies will have new opportunities and strategic plans," said Mr. Mayo.

During a conference call Friday with investors, the chairmen of Canadian Imperial and Toronto-Dominion were heard to be receptive to merging with a U.S. bank. "They appeared quite open to it, down the line," one investor reported.

Canadian bankers have faced a new wave of competition from their southern neighbors, ranging from Wells Fargo & Co.'s direct-mail promotions of small-business loans to credit card offers from MBNA Corp. and mortgages from Countrywide Credit Industries.

Toronto-Dominion, Royal Bank of Canada, and Bank of Montreal-the last two recently made a merger announcement of their own-have taken aim at the U.S. retail banking market via the Internet. (Conversely, ING Group of the Netherlands set up a "direct bank" to go after Canadian business.)

There have been examples of cooperation, too. Citicorp, which also markets credit cards in Canada, entered into a joint investment services venture with Bank of Montreal, as did Mellon Bank Corp. with Canadian Imperial.

Royal Bank is a shareholder in two U.S.-based electronic banking ventures, Integrion Financial Network and Meca Software.

Northern Trust Corp. of Chicago, which provides asset management services to Canadian companies, is seen as another potential merger partner in Canada. So are the Minneapolis companies U.S. Bancorp and Norwest Corp., in part because of their proximity to the border and business overtures they have already made.

Bulked-up U.S. and/or Canadian banks may be increasingly attractive to a buyer from elsewhere, such as HSBC Holdings of London, which owns a sizable Canadian banking operation as well as Marine Midland Banks in Buffalo.

Banks in the United Kingdom "have been especially aggressive about moving outside" to areas like Canada, said Stephen Bigger, analyst in the equity group at Standard & Poor's Corp.

To be sure, all sailing into Canada may not be smooth. Its economy has been slow-growing, and Quebec separatism causes political uncertainty, said Nancy Bush, banking analyst at Ryan Beck & Co., Livingston, N.J. She sees U.S. banks looking more toward the emerging and faster-growing Latin American economies.

Joseph T. Capone, portfolio manager at Hamilton Advisers Ltd., said a U.S.-Canada merger justification could be "very iffy. It's not as easy to cut costs as in the deals we're seeing in the U.S.," with their back-office consolidations and office closings.

"Could you imagine the political fallout if a U.S. bank went in and did that in Canada?" Mr. Capone said. "They'd have to do it in a kinder, gentler manner, and that's not as beneficial to investors as are mergers with dramatic cuts."

But the drive to become truly international should lead U.S. and Canada bankers together, market watchers said.

"It may not be right away, but I'm sure it's something they will be thinking about," said Mr. Carusone of the Bank Analysis Center.

The Canadian public could have a mixed reaction to the creation of another giant bank, said David Baxter, executive director of the Urban Futures Institute, Vancouver.

"There is a pride that we are going to be among the big bankers in the world," he said. "We have always wanted our banks to grow up and be Citibank." On the other hand, "This could feed into the ongoing regional resentments about the concentration of financial power of Toronto."

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