Bank consolidation is moving at warp speed right now, and the future shape of the industry may be coming into view.

Blockbuster deals have popped up once or more a month since last summer. The latest, three weeks ago, was First Union Corp.'s plan to buy CoreStates Financial Corp. for a record-smashing $17 billion.

Another $2 billion worth of dealmaking during November brought the month's total to just short of $19 billion.

At a price equal to 20.2 times CoreStates' expected 1998 earnings and 5.3 times its book value, First Union's deal was "further proof that the consolidators of the banking industry are willing to pay top dollar to assemble their franchises," said David S. Berry, research director at Keefe, Bruyette & Woods Inc.

Indeed, the string of recent high-priced transactions this year has seemed to possess its own momentum and logic. "The pricing was anything but typical, moving to levels seen previously in sellers' dreams," said analysts at Dain Bosworth Inc., Minneapolis, in reviewing the activity.

"These deals are justified by aggressive cost-takeout projections," Mr. Berry said, "with virtually the entire value of the merger synergies being paid to the selling company's shareholders."

The deals are forging huge amounts of value for shareholders of the banks being sold. "Remarkably, virtually every banking company is a potential target in today's environment," the analyst said.

That was vividly demonstrated last week after Wells Fargo & Co. chairman and chief executive officer Paul Hazen said he would be "open" to a takeover offer. Shares of the San Francisco banking company immediately shot up 5%.

"At these kinds of multiples, at these kinds of prices, if somebody came to you with a story that would cause the currency of the combined company to appreciate, then I'm open to it," Mr. Hazen told Bloomberg News.

"A lot of big deals have already been done," Dain Bosworth noted. "The 100 largest banks already control 73% of the industry's assets, up from 60% just one year earlier." Not surprisingly, the most desirable remaining targets for acquisition carry high prices.

What acquiring banks have gained in striking such huge deals, at once unimaginable prices, is membership in the industry's increasingly exclusive longevity club.

After its planned purchase of CoreStates, First Union will join an elite circle of banking companies with market capitalization exceeding $45 billion. "By sheer size alone, these companies are likely, though not guaranteed, survivors in banking industry consolidation," Mr. Berry said.

First Union will be joining Citicorp, NationsBank Corp., BankAmerica Corp., and Chase Manhattan Corp. in the top-drawer group that has emerged as the industry's heavyweight division.

As interesting as the makeup of this Olympian class, however, are the various challengers who could ultimately join it.

Next most obviously in line, Mr. Berry noted, is Banc One Corp., with market capitalization of $33 billion.

Another step down, but also strong contenders, are a trio of companies with market value around $25 billion-the new U.S. Bancorp, formerly First Bank Systems; Norwest Corp.; and Wells Fargo. First Chicago NBD follows at around $22 billion, and J.P. Morgan & Co., at $20 billion.

Much of this year's action has been has been centered in the next cluster-banking companies with market capitalization ranging from $10 billion to $20 billion. The old U.S. Bancorp., Barnett Banks Inc., and CoreStates were all in this pack before being bought by the larger banks.

"There has been a tremendous amount of jockeying for position among this group," said Mr. Berry, who refers to them as "teenagers" because their market valuations are in the teens of billions.

Indeed, Mellon Bank Corp. this year tried to bid for CoreStates. Bank of New York Co. has reportedly had tentative merger discussions with both Mellon and Fleet Financial Group Inc., and BankBoston Corp. is also said to have had talks with those two companies.

In the Southeast, a merger of Wachovia Corp. with SunTrust Banks Inc. has long been the subject of speculation.

"Any two of these teenagers can get together and join Banc One in the $30 billion-plus range," Mr. Berry noted, "thereby ensuring survival through the next round of industry consolidation."

The remaining market-cap teenagers are "the building blocks for future national banking franchises," he said. Each is unique, but all have scarcity value and will command a trophy-franchise price if they are sold.

Thus, Mr. Berry noted, "buyers are making a destiny decision when they buy, while the sellers can command top dollar."

Among the teenage group, Fleet seems a likely seller with a stock priced at 11.7 times next year's earnings, the analyst said. But he added that no deal appears imminent.

In the group just above the teenagers, U.S. Bancorp, with a stock trading at 15.8 times next year's expected earnings, is clearly a possible buyer of a teenager or even a company its own size like First Chicago NBD or Wells Fargo.

"Were the resulting $50 billion-plus market-capitalization company to enjoy the same investor esteem it has today, U.S. Bancorp would then have the financial wherewithal to buy NationsBank," he pointed out.

"That's not a forecast," Mr. Berry hastened to add, "but investors should understand that almost anything is possible as the industry continues to consolidate."

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