Welcome to the aftermath of a market consolidation.

At the Indiana affiliate of NBD Bancorp, Thomas Miller says workers are being pushed to the breaking point. At National City Corp.'s state unit, Vincent DiGirolamo sweats about retaining customers and booking loans.

And Henry L. Meyer 3d says Society Corp. might sell its Indiana subsidiary if its performance does not improve.

Under the Gun

After spending $3.5 billion to wrest control of the Indiana banking market, powerhouse midwestern banking companies are under the gun to boost performance in the Hoosier State.

Though analysts say the long-term outlook is bright, many market entrants won't be breathing easy for several years.

"The employees are under a tremendous amount of pressure," said Mr. Miller, who is chairman and chief executive of NBD Indiana, a unit of the Detroit-based giant.

With six of its 10 largest banking companies now controlled by out-of-state banks, Indiana is the latest territory to undergo a massive banking consolidation.

The newcomers are wrestling with merger expenses, credit quality problems, and customer defections -- daily reminders of the rigors accompanying interstate forays.

The principal challenge facing officers of most newly acquired Indiana banks is matching the performance standards of their parent companies.

According to Sheshunoff Information Services, National City Bank Indiana posted a middling return on average assets of 0.88% in 1992, compared with 1.21% for its Cleveland-based parent.

The weak 0.11% ROA posted by Norwest Corp.'s new Indiana unit paled against the 1.25% of its Minnesota-based parent last year. And Society National Bank of Indiana eked out a 0.77% ROA, compared with 1.24% for its Cleveland-based progenitor.

"The numbers we are producing in Indiana today clearly are not acceptable over a long period of time," said Mr. Meyer, a vice chairman of Society Corp.

Initial Problems

Most of the executives, of course, expected initial difficulties.

Norwest, for example, knew that its biggest Indiana purchase to date, the former Lincoln Financial Corp., was "a troubled bank with some fairly severe asset quality problems," said Sid Bostic, a regional president who oversees Indiana and Ohio.

Mr. Bostic said it will take at least two years to clean up problem credits, which at Dec. 31 exceeded 4.5% of the bank's total assets.

Society is similarly struggling with loan problems at the Indiana company it inherited from its merger with Ameritrust Corp., Mr. Meyer said. In a move to bolster weak results at its Indiana unit, the company has tapped a 28-year veteran from Cleveland, Anthony Heyworth, to run Society National Bank of Indiana.

As with big mergers everywhere, one of the most difficult and painful jobs for the new Hoosier banks is meeting efficiency targets.

As head of National City's Indiana unit, Mr. DiGirolamo has spent a year merging 17 banks into a single unit -- eliminating roughly 600 jobs in the process. Mr. Bostic of Norwest is combining 12 Indiana banks. And NBD's Mr. Miller is busy merging 13 bank charters.

"It's disruptive and emotionally trying for employees," said Mr. Miller.

Will the rocky passages prove worthwhile? Thus far, most of the results are encouraging. NBD has boosted its projections of annual cost savings to $57 million from $44 million and National City raised its projections to $40 million from $30 million.

Maintaining Revenues

But the cuts are only half of the battle. To boost profitability, revenues must hold at least constant, and that's a problem.

Loan demand is generally weak, and customers are defecting amid the tumult of layoffs and reorganizations at many of the banks. Norwest's Indiana unit saw a 15% drop in net loans in 1992, National City's loans declined by 12%, and NBD's dipped by 1.5%.

By contrast, according to Sheshunoff Information, aggregate net loans held constant for all Indiana banks in 1992 -- a strong indication that the newcomers lost business to smaller home-state rivals.

An important lesson emerging from the experience, said Mr. DiGirolamo, is that customers can't be taken for granted.

"You have to be very careful," the National City banker said, "that in the midst of implementing new policies and standards, and branch conversions, you don't erode the customer base."

Banc One Corp. has made the most successful entry into Indiana -- giving credence to the old maxim about getting there first with the most.

The Ohio-based company snatched up the high-performing American Fletcher Corp. in 1986 -- one year after NBD, Society, and Huntington Bancshares made small purchases -- then bolstered the unit through a string of small acquisitions. Banc One's ROA in Indiana soared to 1.72% in 1992 and has not gone lower than 1.2% in the i past five years.

But Joseph D. Barnette, chairman of Banc One Indiana Corp., acknowledged that the competition is getting tougher, particularly in retail banking. "I don't take anything for granted." he said.

Indeed, some players already are attempting to pick off some of the most attractive parts of the market by developing niche strategies.

Zuheir Sofia, president of Huntington Bancshares, said his company -- which recently agreed to buy two healthy Indiana thrifts -- will concentrate on indirect auto lending, small-business lending, and upscale retail lending.

"We will focus on differentiation and efficiency," he said, adding that Huntington will scout for further acquisitions.

What's driving the newcomers? Saturation in their home markets, vulnerable targets, and a relatively robust economy in neighboring Indiana. But economists caution that the state's heavy reliance on manufacturing makes for a volatile environment.

Dominated by the steel and automotive industries, manufacturing makes up almost 25% of nonfarm payroll employment in Indiana, versus less than 17% nationally.

Moreover, Indiana's per capita income ranked 32d out of the 50 states in 1992, according to the Commerce Department.

Indiana banks also have had their share of commercial realty problems. In short, despite the best hopes of the newcomers, no commercial lending bonanza is on the horizon in Indiana.

But backed by some of the most successful banking companies in the nation, the new Hoosiers vow to overcome transition woes -- and know they must.

"Are we making the kind of money Norwest expects," said Mr. Bostic. "No. But we will be there in two or three years."

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