Cleveland pride is playing no small part in speculation about a megamerger between KeyCorp and National City Corp.

Such a deal would create a $164 billion-asset company based in Cleveland-a city that has been fighting hard to keep jobs.

Mayor Michael R. White is said to be personally interested in fostering a merger between the two banking companies rather than seeing either merge with an out-of-town rival. He was highly critical of British Petroleum's takeover of Amoco Corp. last year because it meant a reduction of jobs in Cleveland. The mayor could not be reached for comment.

The merger speculation came amid continued heavy trading in the two companies' stocks. KeyCorp shares rose $2, to $36.9375, on Thursday, and volume was five times the daily average. National City shares climbed $1, to $72.125, on roughly average volume.

A Cleveland-based director of one of the banking companies said Thursday that a merger could be a boost for the city. This person, who spoke on condition of anonymity, said the combination would be preferable to either company being taken over by a larger out-of-state concern.

In-market bank mergers that were once thought inconceivable are now getting a closer look in the wake of pressure from civic leaders. They are concerned about the impact on jobs, charitable giving, and the vitality of their communities.

BankBoston Corp.'s recent decision to sell to Fleet Financial Group illustrates how banking companies, which once chiefly considered shareholder interests in weighing merger offers, are now giving more weight to local concerns. Executive of those companies said they wanted to keep the company in Boston.

Similar pressures may be at play in the case of KeyCorp and National City.

"There is a shareholder focus, but I would not ignore the importance of having a surviving banking headquarters in Cleveland," said Joseph Duwan, an analyst with Keefe, Bruyette & Woods Inc. who covers both companies.

The boards of KeyCorp and National City each include several Cleveland- based directors and there appears to be some board sentiment for a merger.

The director who spoke on grounds on anonymity said a deal "would be good. It would give us a banking organization with $160 billion of assets. That would be significant, and it would be in good shape to survive, rather than two companies at $80 billion each."

The director would not confirm whether the two companies have actually talked.

It's unclear to what extent the two firms have discussed a possible merger. If they are in discussion, talks are in very preliminary stages, said two sources close to the companies. One of those sources, who is close to KeyCorp, said there has been no formal negotiation.

One KeyCorp insider, who emphasized that he has no first-hand knowledge of any merger discussion, said many employees believe a deal is imminent. This person said Cleveland-based board members could be pushing the deal and noted KeyCorp's earnings performance has lagged competitors, including National City.

National City reportedly was interested in buying Mercantile Bancorp. of St. Louis, which agreed to sell to Firstar Corp. of Milwaukee late last month.

Though there would be job losses in Cleveland with a National City- KeyCorp deal, it could actually save jobs. That's because a large amount of Cleveland-area deposits-$5 billion estimated by analysts-would likely be sold to avoid government antitrust concerns. The company that buys those deposits would presumably need to keep workers. What's more, the deal would keep at least one bank headquarters in Cleveland.

Though the banks are declining comment, the chief executives of both companies in the past have left their options open.

National City chairman and CEO David A. Daberko has said a deal with a like-sized company would have to provide complementary businesses to each. National City would gain an investment firm, KeyCorp's McDonald Investments of Cleveland, which it reportedly passed up last year. It would also enter a number of northern states with a KeyCorp takeover. KeyCorp chairman and CEO Robert W. Gillespie has said he would be open to strategic mergers.

KeyCorp has struggled to improve revenues and expenses. National City has been generally regarded as good at improving upon both at companies it acquires.

A former KeyCorp executive, who said he has no knowledge of a deal, said one could make sense because of complementary strengths. KeyCorp is more of a retail bank, while National City is strongest in commercial banking.

"I think there is a better than even chance this will happen," said the executive. Pressed why the deal would work, the source said: "I think (National City CEO David) Daberko would make some of the tough choices needed to be made with KeyCorp."

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