Real estate developer Paul Estridge no longer knows where he stands with his bank. Mayor Stephen Goldsmith is fretting about declining competition. And local banker J. Christopher Graffeo is bracing for "the knockout punch."

Indianapolis has come down with a bad case of consolidation jitters as the two biggest banking companies in the city-Banc One Corp. and First Chicago NBD Corp.-prepare to merge. The deal, local leaders say, could mean fewer jobs, fewer loans, and diminished civic leadership.

The city, which bills itself as the Crossroads of America, offers a clear view of the banking industry's own crossroads. Though banks nationwide are pinning their futures to big mergers, the deals have yet to play out and are causing considerable concern among customers, rivals, and community leaders.

The $30 billion pact between Banc One and First Chicago NBD could well hit hard in Indianapolis. With the two companies' operations overlapping significantly, layoffs and divestitures are expected to be heavy. But even after those moves, the combined company would be an unusally formidable competitor, commanding more than 35% of local deposits.

One study suggests that the new Banc One could hold as much as 50% of the main banking relationships with midsize companies in the city.

"None of the large banks has had what I'd call a knockout punch," says Mr. Graffeo, chief executive officer of National City Bank of Indiana. But Banc One's looming dominance in business relationships will change that. "That's the knockout punch," he says.

Business customers, however, are not exactly cheering.

Mr. Estridge, the developer, has been a customer of First Chicago NBD and predecessor banks for 14 years, and he says he doesn't know what to expect now. He met with his bankers the day after the deal was announced, "and they were as stunned as we were," he said.

"We told them we didn't like it," said Mr. Estridge, whose business churns out revenues of about $100 million a year. "It's the epitome of arrogance and a disservice to customers."

The concerns resonate with Mayor Goldsmith. He says his city may be hit harder than any other by the deal.

"The risk, and it's quite significant, is we lose the ability to have a competitive situation," he says.

It is not surprising that a merger of Banc One and First Chicago NBD would cause such concern in Indianapolis. The two companies now hold the No. 1 and No. 3 positions, respectively, in the local banking market. Their Indianapolis offices, which sit across the street from one another, are two of the tallest buildings on the skyline.

Both companies have been active in public-private partnerships, including the construction of a downtown shopping mall. The merger partners are the two biggest contributors to the local United Way and the Indianapolis Chamber of Commerce. Mayor Goldsmith said he wants to make sure the new Banc One maintains that commitment.

The mayor, who recently aired his views with Federal Reserve officials, is also concerned about funding for affordable housing, small business' access to capital, and job losses. Banc One and First Chicago NBD have yet to disclose the scope of job cuts. The companies combined employ about 6,800 people in Indianapolis.

Meanwhile, activists nationwide are worried about megamergers hurting consumers-with closed branches, higher fees, and slower decisions by the banks.

"I can't think of anything to say how consumers are better off with bigger banks," said Earl Lui, a staff attorney with Consumers Union's advocacy office in San Francisco.

Banc One, for its part, says it remains commited to the civic health of Indianapolis. And it plans on doing a "really good, thorough job of communicating" to customers, said spokesman John Russell. He said business customers would be personally contacted by bankers. So far, he said, it is too soon to tell if customers are upset.

The merger is part of a plan by Banc One to increase market share in the Midwest and eventually across the country.

"The more we're involved in the retail business, the more the concept of relative market share is important," says William P. Boardman, Banc One's senior executive vice president and merger chief.

Just like national retailers, Banc One wants to penetrate a range of major cities, spreading its products across mass markets.

The kind of market share Banc One envisions for itself in Indiana is indeed high.

Without divestiture, the new Banc One would hold 46% of Indianapolis' deposits. In a merger application filed with the Federal Reserve Board, company officials proposed divesting $850 million in Indianapolis deposits- less than half of what community activists expected.

It appears Banc One is testing regulators' model for sizing up market concentration in bank deals. The company is advocating a broad view that goes beyond traditional measures and assesses such factors as nonbank competition and the increasingly fierce market for small-business lending.

Not everyone is fearful of the emerging giant in Indianapolis. As is often the case with big mergers, community banks are betting they will pick up lots of business from people unhappy with service at the merged company.

"It's not good news for Indianapolis, but it's great news for Peoples Bank," said William E. McWhirter, CEO of Peoples Bank and Trust Co. "We foresee that we'll get many of their customers."

Meanwhile, at least one other bank may soon move into the picture. Banc One says in its application to regulators that it will create a viable competitor in Indianapolis through its divestiture. In addition to shedding deposits, Banc One plans to sell an unspecified volume of loans.

John C. Reed, an Indianapolis investment banker with David A. Noyes & Co., said Banc One's divestiture would create the third- to fifth-largest competitor in the market.

"There is certainly going to be some reduction in competition, but there will be competition," Mr. Reed said.

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