First Interstate Bancorp chairman William E.B. Siart has laid out ambitious financial goals for the company that would rank it among the industry's best performers.

In a presentation at a Merrill Lynch & Co. investor conference in New York last week, and in a telephone interview, Mr. Siart said he now expected to exceed a 20% return on equity for the foreseeable future and increase per-share earnings at least 10% a year - at least 15% in good years.

Such performance would be in line with recent returns for Los Angeles- based First Interstate, and also with analysts' expectations. But the fact that Mr. Siart is making these returns a minimum goal highlights the company's turnaround from the late 1980s and early 1990s, when it stumbled under high loan losses and operating costs.

First Interstate lost $288 million in 1991 and began topping a 20% return on equity only in 1994. Since then, executives had been saying that they expected the company to maintain returns of at least 18% to 20%.

Mr. Siart said the $57 billion-asset company expected to exceed a 20% return even after making normal provisions to its loan-loss reserves. Provisions have been suspended this year but are expected to resume next year.

Meeting these goals would put First Interstate among the best performing of the country's big banks. According to Mr. Siart and stock analysts, in recent years only three other bank holding companies among the country's 25 largest - Citicorp, Norwest Corp., and Wells Fargo & Co. - have consistently posted returns on equity above 20%. These companies are

"Historically, banks have not been able to do that," Mr. Siart said.

Return on equity is considered an important gauge of a company's performance since it tells how effectively common shareholders' money is being employed. It's calculated by dividing a company's net worth, or the amount by which assets exceed liabilities, by net income after preferred- stock dividends. Return on equity for the 50 regional banks Merrill Lynch follows is expected to average 15.5% this year.

Sandra J. Flannigan, a Merrill Lynch senior stock analyst, said that even though First Interstate is based in California, which has had a sluggish economy, its branch network is in 13 western states, including many with stronger-than-average economies.

She added that the holding company had done a good job in cutting costs. By the middle of next year, she said, it expects to achieve $167 million in annual cost cuts, after a two-year effort to consolidate back-office operations, streamline management, and reengineer business operations.

Ms. Flannigan also said that First Interstate, like Wells Fargo, has been more aggressive in buying back stock than most banks. Such buybacks normally boost earnings per share and returns on equity.

Mr. Siart declined to comment on recent speculation that a merger between First Interstate and Wells Fargo was likely. But Ms. Flannigan said he seemed to be running the bank like it will stay independent and that she expects this to be the case for at least the near-term.

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