Like a lot of other bank chief executives, KeyCorp's Robert Gillespie knows one stumble can quickly transform a bank from a survivor into a takeover target.

Looking into the future, Mr. Gillespie and others at the Cleveland-based company didn't like what they saw. Unless strategy was changed, they concluded, growth in operating earnings was unlikely to exceed 1994's 6%.

So last March, $66 billion-asset KeyCorp, following the lead of many other companies, announced a major restructuring and cost-cutting effort.

"We realized with the emergence of national banks there was zero probability large, regional banks were going to magically stop at regions' borders and not be part of national networks," the 51-year-old Mr. Gillespie said in a recent interview.

Through its cost-cutting and revenue enhancement program, KeyCorp hopes to generate an additional $95 million to $105 million by 1997. That money will be redeployed for other tasks, such as reconfiguring branches or marketing.

By repositioning its business lines, KeyCorp has embarked on a journey to double earnings growth by 1999.

The company hopes to achieve a 12% annual growth in earnings per share, 18% return on equity, and 1.25% return on assets by 1999, Mr. Gillespie said.

The blueprint for its growth, dubbed First Choice 2000, is a plan to reorganize into four major business lines: national consumer finance, corporate banking, community banking, and personal financial services.

The cost-cutting program doesn't call for a large number of layoffs, but KeyCorp has not specified how many jobs are to be eliminated. A full 61% of the savings are to come from streamlining operations. Most of that will result from an effort already under way - consolidating 13 banks into four regional banks.

The company has so far trimmed itself to 12 banks.

Savings will also be realized through outsourcing, more efficient use of technology, and organizational restructuring.

For all of KeyCorp's talk about repositioning and marketing, bank analysts who follow the company say they just want to see results. These analysts point out that the recent restructuring flattened profits. KeyCorp earnings declined 3% in 1995, when the company netted $825 million.

Thomas Maier, an analyst with Everen Securities in Chicago, generously described 1995 as "a transition year" for KeyCorp. He looks for a modest increase in income this year, and better performance within the next two to three years.

Catherine Murray, an analyst with J.P. Morgan Securities Inc., said she was encouraged by operating profits in the second half of '95. She said there is a good chance the company will see revenue growth in the next couple of years.

Other analysts are more skeptical.

"The real story with KeyCorp is, when will they start generating top- line revenue growth?" said Fred Cummings of McDonald & Company Securities, Cleveland. "And to be honest, they can't tell you."

Mr. Cummings believes expenses need to be cut more than the anticipated $105 million to meet growth expectations.

Some of KeyCorp's strategies are untested. It's putting an extraordinary amount of time and money into marketing. The company plans to double its marketing budget in the next couple of years. The goal, like that of many other banks, is to cross-sell more products to customers.

Company executives also have high hopes for the bank's consumer finance business, which contributes about 17% of current operating income.

"We think we're going to be America's leading provider of financial services," Mr. Gillespie said. "We're going at it not just as one of the boys. We're going at it to dominate the business."

A. Jay Meyerson, who heads KeyCorp's national consumer finance group as chairman and chief executive of Key Bank USA, said Minneapolis-based Norwest Corp. is the role model he looks to for inspiration.

But Mr. Cummings said he believes KeyCorp is going to have to make a large acquisition of an existing finance company before the bank will be able to make any real money in consumer finance.

"I don't see the company as a top performer for earnings growth," Mr. Cummings said. "The business mix does not allow for it."

As part of 1995's rebuilding, KeyCorp divested some businesses - a $25 billion mortgage servicing operation in March and 24 branches of its Florida thrift, Society First Federal Savings Bank, in November.

In addition, the company made acquisitions to position its consumer finance business: buying New York money-management firm Spears, Benzak, Salomon & Farrell Inc. in April, and AutoFinance Group Inc., a Chicago- based specialist in subprime financing, in September.

However, Mr. Cummings said the company should be more focused with Mr. Gillespie at the helm. Mr. Gillespie was named chief executive last September - earlier than originally announced - and Mr. Cummings believes that is because the company's stock price was beginning to drop.

Mr. Gillespie is also seen as a stark contrast to his predecessor, Victor Riley Jr.

Mr. Riley was seen as domineering, while Mr. Gillespie is more open to outside ideas, says Gary Allen, a KeyCorp senior executive vice president and chief banking officer.

Mr. Gillespie, who calls banks today "the 1950s model with a new paint job," is apt to compare his bank to retailers he considers successful, such as L.L. Bean. Sales and marketing have become extremely important to KeyCorp.

"It isn't the point whether you sell backpacks or ladies apparel or lenses for eye glasses, the point is how do you get to know your customers," Mr. Gillespie said.

KeyCorp, like many other large banks across the country, is trying to get to know its customers through data base marketing.

J.P. Morgan Securities' Ms. Murray said the marketing effort hasn't shown any results yet, but she believes it's positive. "With the increased emphasis on marketing, they're asking a lot of good questions that challenge the basic operating assumptions," she said.

With competition and the size of banks doubling, the only way a large regional bank can get to know customers is through data bases, Mr. Gillespie reasons.

"We believe technology is our only chance to retain personal service," he added.

For instance, if a customer is accepted for a car loan through KeyCorp's indirect auto finance company, a computer will automatically send an application for a Key credit card.

Accordingly, the bank is tailoring products for four types of customer: emerging affluent, mature, mass market, and small business.

Out of this strategy also comes branches specific to demographics. A KeyCorp branch in an area with a greater number of elderly customers is going to function and look differently than a branch near a college.

KeyCorp plans to roll out the new, demographically specific branches in the second quarter, in Columbus, Ohio, Seattle, and Syracuse.

Mr. Gillespie believes KeyCorp's growth is going to come from specializing, especially in three areas: consumer finance, commercial finance, and core community banking.

Though much emphasis has been placed on KeyCorp's retail operations, commercial lending growth could be drummed up through specialized loan products in real estate, health care, and media industries.

James Bingay, executive vice president of corporate banking, said there's enough growth in the health care industry and among acquisition- hungry media chains to spur more lending in those areas.

"We create value by understanding their businesses almost as well as they do," he said.

If Mr. Gillespie has his way, the bank will also understand retail customers as well as they know themselves.

"Times call for a new vision," he said. "The days of the old one-size- fits-all, that's dead as a doornail."

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