In a dramatic flourish at the opening of the Bank Administration Institute's retail delivery conference last week, First Union Corp. chairman Edward E. Crutchfield discarded his prepared remarks.

He then launched into a rousing defense of bigness in the banking industry-a debating point that this annual technology extravaganza was not originally supposed to be about.

Its theme was a benign-sounding "Banking in the Global Village," and a good part of the program covered issues of interest to community bankers. Mr. Crutchfield, in effect, told many of them that their days are numbered.

Except for institutions like private banks that are very good at asserting a specialty, Mr. Crutchfield said, only big companies with big bucks to harness the necessary technology can survive the inevitable shakeout. And they won't be narrowly defined as traditional banks, which are "declining, dying, going-away businesses."

The current 8,000 commercial banking organizations will dwindle to 2,000 within 10 years, and "merger mania will last until there are 10 or 12 or maybe 15 dominant financial service companies," he predicted.

"I know you don't like to hear that," said Mr. Crutchfield, who only two weeks earlier announced the merger agreement with CoreStates Financial Corp. that would push First Union past $200 billion of assets.

"I don't like bigness. I grew up in a small town. But they don't pay me to be nostalgic."

They might as well pay him to be a provocateur for all the grumbling he caused at the retail delivery gathering.

One of the favorite topics of conversation among community bankers in attendance-3,500 of the 9,500 at the New Orleans Convention Center were practitioners, the rest vendors-was how they had taken business away from big banks involved in mergers.

Anat Bird, senior vice president of strategic initiatives at Norwest Corp., who led a community banker "peer group discussion," reported widespread dissatisfaction with technology providers that are perceived to be more concerned with their big-bank accounts.

That might just drive small banks into the arms of Microsoft Corp., whose chairman, Bill Gates, delivered a populist message about how technology can get them up to speed on the Internet and elsewhere at "very low cost."

It was not just the littlest who took umbrage at the bigness message.

A senior executive at a superregional bank less than half First Union's size grumbled that Mr. Crutchfield was just "saying what he has to say" to justify his particular strategy.

A consultant from a firm probably known to Mr. Crutchfield said, "He confuses the concept of scale with having more money than he knows what to do with."

Those comments had to stay, understandably, off the record. But there were also strong public reactions.

The securities analyst Thomas K. Brown, who is openly feuding with Mr. Crutchfield, didn't mince words at a Thursday breakfast session.

To those who invoke economies of scale, Mr. Brown said, "B---t! Fleet, BankAmerica, Citicorp, and Chase all had scale in 1990" before monolines like specialized credit card lenders came on the scene. "The monolines didn't have scale, but they beat 'em," Mr. Brown said. "It wasn't scale that did it, it was skill."

The Donaldson, Lufkin & Jenrette Securities Corp. vice president cited market-share changes between 1992 and 1996 in Gastonia, N.C. The "scale players" in the state, First Union and NationsBank, were off 9% and up 1%, respectively. Regional competitors Centura Banks Inc. and First Citizens Bancshares were up 20% and 22%, respectively.

"At the local level there is no benefit to scale," Mr. Brown said. He added that a consulting firm had done a study that indicated this to be true in every industrialized country. "It didn't publish it because its clients wouldn't like it."

For his recommendations, Mr. Brown keeps a list of banks he says are best prepared for the future strategically and technologically. At the top now are Centura, Norwest, Royal Bank of Canada, Star Banc Corp., Wells Fargo & Co., and Wachovia Corp.

Of those, the closest to an international-class megabank is $172 billion-asset Royal, the largest in Canada but not quite big enough to crack the North American top five.

John E. Cleghorn, chairman and chief executive officer of Toronto-based Royal, spoke temperately: "It cannot be demonstrated that there is benefit for the banking consumer" in a large-scale organization.

"We don't diminish (the importance of) scale," he said in an interview during the New Orleans meeting. "But we have done some sharing of costs with some medium-size companies that are damn good." (He was referring to joint ventures like the Integrion home banking consortium.)

Mr. Cleghorn recalled from his work at Citibank in the 1960s and 1970s that the term "congeneric" was fashionable there-meaning a conglomerate in relatively closely related fields.

"Merely putting together a financial services congeneric with all the constituent parts does not guarantee success," Mr. Cleghorn said in a speech. Success is determined by "how effectively you integrate different cultures and different operating and delivery systems into a harmonious, efficient group all traveling in the same general direction while keeping customers, employees, and shareholders excited and committed."

He said Royal Bank initially moved too fast in its integration of Royal Trust Co., alienating customers after its acquisition four years ago. By paying closer attention to their preferences, Royal Bank managed to retain 90% to 95% of them.

To be sure, Chase Manhattan Corp., NationsBank Corp., and more have extolled getting gigantic. Chase, for example, said its merger with Chemical Banking Corp. was crucial to acquiring necessary technology and economies of scale.

"The bigger banks can afford to place multiple bets, which provides the flexibility to move the way the market goes," said Patrick J. Swanick, vice chairman of KeyCorp and head of its technology subsidiary. "There is no one silver strategic bullet. Smaller institutions couldn't match up with the necessary technology investments."

But Ms. Bird of Norwest, an $85 billion-asset company that aims to keep a close community focus and also happens to have a trust and private banking alliance with Royal Bank, contended, "You don't have to be really big to get scale. You have to define your niche in a way that makes you a big fish in the pond."

"De novo banks are still sprouting up all over the place," she pointed out.

But the bigness beat goes on. After the retail delivery crowd returned home, the two biggest banks in Switzerland announced Monday they would merge to create a $600 billion-asset behemoth. The size and scale "will make it easier for us to weather storms in financial markets," said Union Bank of Switzerland CEO Mathis Cabiallavetta.

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