Fifth Third Bancorp and Bank One Corp. were once both small Ohio banks, but as they have grown they have moved in very different directions.

Fifth Third has become the star that Bank One had been until a matter of months ago. And Fifth Third's philosophy is very similar to the one that used to make Bank One a sweetheart of investors. That philosophy is to acquire smaller banks and let them keep their top executives and their boards of directors but expect them to meet stiff demands. The local managers also are expected to learn techniques and adopt products proven to be successful in other units of the system.

As long as Bank One hewed to this approach, its performance - and its stock price - boomed.

It was only after it changed course, centralizing the organization and entering new ventures, as it did in 1997 by acquiring First USA Inc., the credit card issuer, that it began to flounder.

Bank One's book value, for example, grew at an annual rate of only 2% over the last five years, compared with 15% for Fifth Third, according to data compiled by Keefe, Bruyette & Woods Inc. And last week, Bank One chief executive John B. McCoy, once an icon of the banking industry, resigned as a result of less-than-robust earnings and a plunging stock price.

Some analysts say that comparing the two gives an indication of how banking companies can be affected by size.

Bank One, with assets of $264 billion, now is the nation's fourth-largest banking company. The $33 billion-asset Fifth Third, though growing smartly, is number 28.

"The model for the future is going to be closer and closer to Fifth Third," said John Wimsatt, an analyst at Friedman, Billings, Ramsey & Co. "Other banks are going to have to shift to this model."

"The conventional wisdom," said Charles Cranmer, a principal at Keefe Managers Inc. in New York, "is that you need scale in this business to be profitable. And nothing could be further from the truth." He said Fifth Third "has stuck to its knitting" while Bank One "has gone off in all different directions."

Cincinnati-based Fifth Third leads all major banking companies in its price/earnings multiple: 31. Bank One, formerly of Columbus and now of Chicago trades at a lowly 9.

Bank One recently pinned many of its hopes on First USA, for which it paid $7 billion. But that unit, from which Bank One had been expecting one-third of its growth in earnings per share, hit a wall this year, forcing downward revisions in corporate earnings projections.

Fifth Third's strategic principles have held pretty much the same over the years: pursuing revenue growth by promoting an aggressive sales culture, aggressively controlling costs (few companies get close to its 39% efficiency ratio), and making relatively bite-size acquisitions into which it could instill its distinct culture.

The banks it has bought have tended to be in Fifth Third's core region of Ohio, Kentucky, and Indiana. The company typically buys smaller banks and thrifts, which are easier than big ones to integrate and convert to the Fifth Third culture. Among them have been $659 million-asset Peoples Bank and Trust Co. of Indianapolis; $3.3 billion-asset Citfed Bancorp of Dayton, Ohio; and $1.3 billion-asset State Savings Co. of Columbus.

As Bank One did in the past, Fifth Third usually allows former top executives to remain but prods them to adopt methods from elsewhere in the organization if those methods generate higher profits. Also, keeping the local boards intact creates the impression among customers that little has changed.

"We are not smarter than anyone else," said Neal Arnold, chief financial officer and executive vice president of Fifth Third. "But changing a culture tends to take an awful lot of time. That is the challenge you are up against. The bigger the company, the more it tends to dictate from the inside out."

Fifth Third's high P/E multiple gives it flexibility in its dealmaking. With its shares going a longer way than other banking companies', Fifth Third can avoid dilution of its per-share income, said Mr. Wimsatt.

Fifth Third gains from acquisitions in other ways. With its purchase in November of CNB Bancshares of Evansville, Ind., Fifth Third will not only achieve cost savings by integrating CNB's back office with its own, but will also make significant gains on the revenue side, observers said.

Fifth Third plans to squeeze more per-employee profits out of CNB's work force, which last year yielded $35,000 a head, about the industry average, against Fifth Third's $72,000 each, according to Mr. Wimsatt.

Fifth Third motivates its staff with performance measurements, ranking the sales force in every product category ranging from new commercial accounts to brokerage sales to deposit generation to mortgage origination.

"It helps create focus," Mr. Arnold said. "We rank people top to bottom in sales. And you don't want to be at the bottom of the list two successive times."

Also in the interest of motivation, Fifth Third is generous with compensation in the form of shares, restricted stock grants, and options. The employees own 10% of the company, and 77% accumulate shares through payroll deductions, Mr. Arnold said.

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