Norwest Corp.'s pending merger with Wells Fargo Co. has slowed its negotiations to acquire a bank on the U.S.-Mexico border.

Norwest, based in Minneapolis, has been growing rapidly in Texas and viewed Mercantile Financial Enterprises Inc. of Brownsville as a vehicle for increasing its presence in the Rio Grande Valley.

Graciela Gutierrez, president of Mercantile, an $850 million-asset banking company, said she hopes a definitive agreement will be signed by the end of the month.

They have already signed a letter of intent.

Until the June 8 announcement of its $34 billion deal with Wells of San Francisco, Norwest's acquisitions were smaller-more like the one it plans to pursue with Mercantile.

The Texas bank's sale to Norwest would end a saga dating back to when Mercantile's owner, Mexican businessman Olegrio Vazquez Rana, reached a deal with Laredo National Bancshares in the spring of 1996. The Federal Reserve Board spent the better part of two years deciding whether to approve the merger application.

In January, Laredo National and its majority owner, Carlos Hank Rhon, withdrew its application to the Fed, citing the unusual delay in the regulator's decision.

The Fed never said why it did not give approval, but it had reportedly spent a lot of time examining the bank and looking into Mr. Hank Rhon's business practices. Like Mr. Vazquez Rana, Mr. Hank Rhon is a prominent industrialist in Mexico.

Last month Norwest announced the signing of its letter of intent with Mercantile, which was not yet in the form of a definitive agreement.

Officials at Norwest and Mercantile said their deal has been delayed slightly because of the preoccupation with Wells Fargo. A lawyer for Mercantile said the transaction is now being held up only for technical considerations.

Still, Charles I. Miller, managing director of Alex Sheshunoff & Company Investment Banking, said the Wells Fargo deal simply overshadowed the one in Texas.

"This is obviously a much smaller transaction," said Mr. Miller, who is the investment banker representing Mercantile.

Norwest was the highest bidder among several interested banks, said Mr. Miller. He declined to name the others, but Mr. Miller said Mercantile had received the inquiries last year as suspicions grew that the Fed would not approve the deal with Laredo National.

Combined, Norwest and Wells Fargo would be a $191 billion-asset holding company with banking business concentrated in midwestern and western states. In Texas, Norwest would strengthen its No. 4 position, with about $14 billion of deposits, or 8% of the state's total.

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