The forces of bigness are triumphing in all sorts of businesses, and banking should be no exception.

John B. McCoy, president and chief executive officer of Bank One Corp., carried that message to the Bank Administration Institute's Retail Delivery Conference, saying it not only motivates his strategy but should also prod Congress into finally passing financial reform legislation.

If the law does not change, Mr. McCoy warned in his keynote speech Wednesday to banking's biggest convention, U.S. banks will be unable to lower their costs to compete effectively.

"It is time for Congress to decide quickly what they want our industry to look like," Mr. McCoy told an audience of some 9,000 people. Banks "have to get bigger to be efficient. If not, the competition will sweep them away."

"If we don't get this legislation soon, we will become irrelevant to our customers," he added. "And we too will go the way of black-and-white television."

The size discussion dominated the conference's opening, as it did a year ago when chairman Edward E. Crutchfield of First Union Corp. made similar statements about the need for scale. But there was not much debate.

Mr. McCoy was followed by Jerry A. Grundhofer, president and chief executive officer of Firstar Corp. of Milwaukee, which at $38 billion of assets is about one-seventh Bank One's size.

Mr. Grunhofer said that he liked where he is as more of a regional bank, but that size also matters, if to a lesser degree.

"More important than assets is that we have more than $16 billion of market capital," Mr. Grundhofer said. "That puts is in a very decent position to survive and prosper in the 21st century."

"Can you get bigger and still service the customer?" he asked in what was a largely a back-to-basics address. "It's our challenge but we have to find ways to do it."

Mr. McCoy marveled at how a few years ago he "never would have guessed we would have almost $300 billion of assets." But just as telecommunications is consolidating with mergers like SBC Communications with Ameritech, and just as the auto giants Daimler-Benz and Chrysler just got together, Mr. McCoy said banking and financial services are subject to irresistible, global market and technological forces that "make scale and scope more and more important."

He pointed out that there are "just two booksellers" of any size on the World Wide Web, indicating that for banks too, strong brands and broad market reach will be essential to succeed in a networked economy.

"If you're not a player, it will be hard to get to be a player," Mr. McCoy said. "It is hard for me to see how a $1 billion or $2 billion bank is going to play in the Internet world. Without access to a portal, it will be hard (for customers) to find you."

He suggested if banks can't establish strong Internet entry points in their own right, they have to form partnerships with the likes of Excite and Microsoft, as Bank One and its First USA credit card subsidiary have. Those expensive options may be closed to smaller institutions.

"The Internet lets us put a branch in every home," said Mr. McCoy. "Customers simply don't care any more whether they are dealing with a bank, a securities company or an insurer. They want the best advice at the lowest cost."

Mr. McCoy said banks need to have a vision, a strong brand, and the "gumption" to perform on a global stage.

Supporting his views on the inevitability of bigness, the Chicago-based banker said the first $1 trillion-asset bank is not far off. But he said chief among banks' worries should be "what companies are out on the Internet taking our business away." To survive, he said in another recurring theme in the retail banking community, banks need to focus on harnessing information, not just managing deposits.

He said banks must contend with the consequences of "a record number of applications for bank and thrift charters" from nonbanks such as insurance companies and retailers.

"I want to compete the way everyone else can compete," so that banks can pursue lucrative product lines, he said. "Everybody comes in and takes the good stuff and we are left with the dregs."

For the old Star Banc Corp. of Cincinnati, which acquired Firstar and took that name, consolidation made it essential to re-energize the consumer bank and generate the kind of top line revenue growth that investors and shareholders like to see, Mr. Grundhofer said.

Mr. Grundhofer said he expects to continue the Star Banc tradition of being a top-performing bank.

"Our way is not the only way," he said, "but it really has worked for us and we can achieve outstanding results as a combined company."

He said Star had the enviable record of total shareholder return on equity of 20% and above average earnings per share. "In the coming turbulent years," he vowed, "the stock will maintain its value."

"We consider consistent earnings per share the single most important element of financial results, along with top line revenue growth," said Mr. Grundhofer. "We're looking to beat those results with the new Firstar."

The new Firstar has 720 branches and 1,400 automated teller machines in 10 states. In the coming years, Mr. Grundhofer expects 60% of profits and 55% of the balance sheet to come from the consumer bank.

Cost control is critical and fundamental to that strategy but "it is finite," whereas revenue generation is unlimited. "When you grow revenues faster than expenses great things happen," he said.

Five and half years ago, Mr. Grundhofer said, Star Banc's branch network was not optimal and its market capitalization was $900 million. Now, with the power of $16.3 billion in market value, Firstar's aim is to provide consumers with the convenience they want by integrating delivery channels.

Firstar offers banking by branches-90 of which are at in-store locations-super ATMs that dispense stamps, bus passes and foreign currency; call centers; personal computers; video kiosks; and the Internet.

"Customers have their preferred alternatives," said Mr. Grundhofer. "Our 24-hour banking system means that we can promote ourselves as a bank without boundaries." The key element in developing all business lines, he said, is to take full advantage of technology to carry the commitment of convenience to customers.

The PC banking program has mushroomed, he said, signing up 50,000 customers since 1995. "Internet banking is clearly a phenomenon that is going to grow," he said. "It combines the best of mass marketing with one to one marketing."

"We are in the business to increase value to our shareholders," said Mr. Grundhofer, "but it is satisfied customers who keep our doors open." This sales culture, he added, is crucial to growth. For now, "we just run our business and want our expense to revenue ratio to come down."

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