While other Midwest banking companies are inking out-of- market deals, Fifth Third Bancorp's George A. Schaefer Jr. says he is happy to stay closer to home.

Interviewed Monday at the company's headquarters here, the chief executive officer said he continues to look at any bank or thrift in Fifth Third's Ohio, Kentucky, or Indiana territory with at least $500 million of assets.

Ohio is of particular interest, he said. Some attractive candidates include $28.6 billion-asset Huntington Bancshares of Columbus, $24.6 billion-asset Charter One Financial Inc. of Cleveland, and $9.2 billion- asset FirstMerit Corp. of Akron, Mr. Schaefer said..

"Closer to where we operate makes more sense," he said.

FirstMerit chairman and CEO John R. Cochran declined to comment on the idea, and Charter One officials could not be reached.

Mr. Schaefer said Fifth Third would consider only acquisitions that offer opportunities to cut costs and increase revenues. He said he especially likes companies that have not succeeded in pitching a diverse group of products.

"We try to be good on the cost side, but we also cross-market to customers," he said.

Huntington appears to be at the top of Mr. Schaefer's shopping list. It would give $29.6 billion-asset Fifth Third added heft in two of Ohio's biggest cities, Columbus and Cleveland.

The announcement last week that Milwaukee-based Firstar Corp.'s would buy Mercantile Bancorp of St. Louis for $10 billion may put pressure to Huntington to succumb, said Michael Plodwick, an analyst with Lehman Brothers.

Like Firstar, Fifth Third has a high-flying stock that gives it an industry-leading price-to-earnings multiple. In fact, Fifth Third is the only large bank that trades higher than Firstar, with a stock price 35 times its estimated 1999 earnings per share.

That high ratio can be used as a "deadly weapon" to pay for acquisitions, Mr. Plodwick said.

In asset size, Fifth Third ranks 31st in the nation. But its market capitalization makes it 13th, big enough to buy banks that surpass it in assets.

Huntington, meanwhile, has had trouble increasing profits and is in the midst of a restructuring that includes extensive layoffs. "Huntington is like Mercantile in that it's been on the block in Wall Street's eyes for some time," said Anthony Polini, an analyst with Advest Group.

However, Mr. Schaefer pointed out that such deals are not to be made hastily. If "you don't safeguard that P/E" or use if you use it frivolously, he said, "you can lose it pretty quickly."

For its part, Huntington said it is not interested in selling. "We think even amid all these mergers, there is still a place for strong-performing regional banks, and that's where we see the Huntington," spokeswoman Hillary Jeffers said.

Mr. Schaefer made clear he is not interested in attempting a hostile takeover. Fifth Third waged an unsolicited attempt to buy Firstar predecessor Star Banc Corp. of Cincinnati in 1992. That effort failed, and Star became one of Fifth Third's strongest competitors, eventually buying out Firstar of Milwaukee and recently announcing its deal to purchase Mercantile.

But Mr. Schaefer seems unfazed. He said he controls his destiny, regardless of mergers between competitors.

"When customers walk in they don't say, 'How big is your bank?'" he said.

Fifth Third can also expand by continuing to do smaller deals. Last year it acquired $3.3 billion-asset Citfed Bancorp of Dayton, $2.8 billion-asset State Savings Co. of Columbus, and the investment firm Ohio Co. It also has three acquisitions pending that would add $1.3 billion of assets.

"We continue to be opportunistic," Mr. Schaefer said.

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