What's next for John F. Grundhofer? In the eyes of Wall Street, anything he wants.

The investment community was wowed Thursday by the First Bank System chairman's deal for U.S. Bancorp, valued at $8.4 billion. The move would give the Minneapolis banking company a long-sought foothold in the West, nearly double its assets to $70 billion, and position it for further expansion.

"Virtually nothing is off limits to them now," said Salomon Brothers analyst Michael Plodwick. "This is not a geographically restricted company."

The 58-year-old Mr. Grundhofer, long known as an aggressive cost cutter and a disciplined acquirer, has ruled out any further acquisitions until the merger, set to close by Sept. 30, is fully integrated. That isn't expected to happen until the second or third quarter of 1998.

"It would be folly for us to even think about doing something actively while this is going on," Mr. Grundhofer told Reuters Friday.

But once the banks are combined under the U.S. Bancorp banner, observers don't expect Mr. Grundhofer to waste any time getting back in the hunt.

"The first three criteria for an acquisition are opportunity, opportunity, opportunity," said H. Rodgin Cohen, a partner with Sullivan & Cromwell.

One possible destination is California. Mr. Grundhofer's aspirations to expand in the Golden State have been well known since First Bank System in late 1995 launched an ultimately unsuccessful bid to rescue First Interstate Bancorp from a hostile takeover by Wells Fargo & Co.

One of the quickest ways to gain a statewide presence in California would be to pick off one of its giant thrifts-perhaps H.F. Ahmanson & Co. if it lost in its hostile bid for Great Western Financial Corp. But analysts said they believe Mr. Grundhofer, having steered First Bank System away from the mortgage business, is uninterested in a thrift.

"It's not their strategy, and it's not how they want to enter California," said R. Jay Tejera, a bank analyst with Dain Bosworth, Minneapolis.

Rather, he said, Mr. Grundhofer could build a northern California presence by buying up small commercial banks, with around $1 billion to $4 billion of assets. He named privately held Bank of the West in San Francisco ($4.5 billion of assets) and Westamerica Bancorp. in San Rafael ($2.5 billion) as appealing targets.

He expects Mr. Grundhofer to concentrate on fill-in or larger deals in states where the combined U.S. Bancorp will not have a dominant presence: California, Illinois and Wisconsin. There also could be opportunities for smaller deals in Colorado.

Should Mr. Grundhofer prefer to shop in his own backyard, several Midwestern banks are well within his grasp, said Mr. Plodwick. Among them: National City Corp., Comerica Inc., Firstar Inc., or even a fish as large as First Chicago NBD Corp.

U.S. Bancorp's new reach across the northern tier of the nation will bring it into direct competition with KeyCorp-but most observers said an acquisition of the Cleveland-based banking company is out of the question.

Mr. Plodwick said antitrust issues would surely arise. And George Bicher, bank analyst at Alex. Brown & Sons, Baltimore, said KeyCorp is determined to remain independent and become a viable national player itself.

Those who know Mr. Grundhofer well have little doubt that he will continue to make waves. "He's very good at what he does and he's not afraid to go out and make something happen," said his brother, Star Banc Corp. chairman Jerry Grundhofer.

But one investment banker sounded a note of caution. "Grundhofer's got a lot of respect on Wall Street because of his successful mergers, but those have all been with pretty small banks, nothing at all like what he's trying to achieve here," said this source, who requested anonymity.

Overwhelmingly Wall Street is betting Mr. Grundhofer can do it. Eight brokerages upgraded the bank's stock Friday, and First Bank shares recovered all the ground it lost the day of the merger announcement, closing up $2.50 at $78.

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