Building a broad branch network is less vital to earnings growth than having a concentration in key markets, according to a report due out today.

DBRS Inc., a ratings agency in Toronto, found that large banking companies such as Bank of America Corp. and Wachovia Corp., both of Charlotte, which are rapidly expanding their footprints, do not always maintain commanding presence in their local markets.

In contrast, it said, Wells Fargo & Co. is developing dominant positions by expanding primarily in existing markets.

"Being the biggest bank doesn't absolutely mean that you are the strongest in the trenches," Roger Lister, the chief credit officer for the U.S. financial institutions group at DBRS, said in an interview Wednesday.

For DBRS, strength means having one out of five branches in any given city. Mr. Lister said such concentration helps a company leverage its marketing and provide convenience for customers.

Also, a dominant share makes it easier to fend off newcomers and upstarts, Mr. Lister said.

"In most markets, big banks face strong competition from their superregional peers, other large banks, and well-entrenched local competitors," he said. "The dynamics are shifting as the largest players evaluate their position and what they want to do next."

The study looked at the nation's largest retail bank networks, rating them based on market share as determined by branch count. Mr. Lister said DBRS largely avoided deposit market share because the data can be distorted in cities where banks hold large corporate deposits.

The best-performing banks, he said, tended to grow in their core markets rather than focus on expanding the geographic reach of their branch networks.

B of A, which became the nation's largest retail bank through acquisitions across the country, was the fifth-best bank, with only 28% of its branches in cities where it had at least 20% of total locations, down from 32% a year earlier. DBRS determined that its pending acquisition of LaSalle Bank Corp. from ABN Amro Holding NV would only change B of A's standing nominally.

Analysts have said that B of A's declining dominance in established markets shows how the $1.5 trillion-asset company actively manages deposit levels to avoid having 10% of the nation's deposits when it makes U.S. acquisitions.

Bank of America said it would not comment without seeing the DBRS report.

Liam McGee, the president of B of A's global consumer and small-business bank, recently dismissed such views as "a flawed observation by a couple of pundits."

He said during a conference call last month hosted by Deutsche Bank Securities that the retail strategy focuses on profitability. "There's no two-step here," he said.

Wells Fargo's retail network, on the other hand, had the most concentration - nearly half of its branches were in markets where it had 20% of a city's branches, DBRS found.

That was up from 44% a year earlier and reflects the $486 billion-asset San Francisco company's strategy of growing in its indigenous markets in the West and Midwest, partly through acquisitions. A Wells spokeswoman said executives were unavailable for comment.

JPMorgan Chase & Co. was the runner-up to Wells, with dominant share in 36% of the cities where it has branches. But Tom Kelly, a spokesman for the New York company, questioned branch share as a gauge of market dominance. "While, clearly, you need a formidable branch presence, we're not sure there's a magic percentage for branches in a market," he said.

Wachovia's decision to buy Golden West Financial Corp. and enter the California banking market diluted its dominance, DBRS found. About 32% of the $706 billion-asset company's branches were in cities where it was dominant, down from 41% a year earlier.

Mr. Lister said increased competition in Florida played a role in the decline.

G. Kennedy Thompson, Wachovia's chairman, president, and chief executive, has laid out a plan to double its California branch count, which now stands at 150, over the next five years.

He said during a May 1 conference call hosted by Deutsche Bank Securities that he eventually wanted to have 600 to 750 branches in California.

He said Wachovia has no plans to enter new markets and that it could do an effective job of retail banking in California "with far fewer branches than some of the big banks there."

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