Last year banks bought other banks at a furious pace. But nearly halfway through 1996, nonbank financial companies are the clear acquisitions of choice.

In late May, First Union Corp. agreed to pay $900 million in cash to buy a railroad leasing unit, and Bankers Trust New York Corp. said it would buy a well-known advisory boutique in a deal estimated to be worth at least $150 million.

By contrast, the largest bank-to-bank merger unveiled in May was valued at $107 million.

"Banks are finding that their core businesses are really a very mature industry, which means it is competitive and the spreads are narrowing," said Robert Baer, director of the financial institutions group at Bear, Stearns & Co.

"So in order to try to increase return on equity, banks are looking to high-ROE nonbank businesses," he added.

On average, bank equity returns are between 16% and 18%, but the desirable nonbanks deliver returns over 20% on equity, he estimated.

Many banks still have the high stock prices necessary to buy other banks. After rising 54% last year, the Standard & Poor's index of major banks is up 14% this year, according to ILX Trading Systems.

But the prices many smaller banks are asking for are still too high, said R. Harold Schroeder, a banking industry analyst at Keefe, Bruyette & Woods Inc., New York.

"The large banks can't make acquisitions work at the prices the smaller banks are asking for," he said.

The types of nonbank businesses that banks are looking at include asset management, investment banking, leasing, and consumer and commercial finance.

First Union, which has long been one of the most aggressive acquirers of other banks, chose a nonbank acquisition as the sequel to last year's $5.4 billion merger with First Fidelity Bancorp.

First Union agreed to pay roughly $900 million for USL Capital Corp.'s railroad leasing unit in late May, making the bank the second-largest lessor of freight cars in North America.

But rail car leasing is hardly the only nonbank business ambition First Union harbors.

Edward E. Crutchfield Jr., its chief executive, has said he wants to dramatically increase his bank's assets under management - the bank had been mentioned as a possible acquirer of Van Kampen American Capital - and has indicated traditional bank growth will come internally, not through external acquisitions.

Another bank area of growth has been investment banking.

Bankers Trust New York, in its first major deal under new chief executive Frank Newman, agreed to buy highly regarded merger adviser Wolfensohn & Co.

The deal includes putting Wolfensohn head and former Federal Reserve chairman Paul A. Volcker on Banker Trust's board of directors.

The purchase price was not disclosed, but it was believed to be in excess of $150 million.

Cleveland's KeyCorp, which has indicated it is not interested in bank acquisitions, has also been aggressive in the Midwest, buying smaller investment banks.

Even London-based National Westminster Bank PLC decided to sell its U.S. retail bank operation, but expanded its U.S. investment banking presence by buying an investment boutique, Gleacher & Co.

One factor driving the nonbank activity is the emergence of electronic commerce. Bank branches are losing their appeal as customers, particularly younger ones, are using other means to bank.

Wells Fargo & Co., which bought First Interstate Bancorp. earlier this year, recently agreed to a substantial stake in the U.S. operation of Mondex, the English smart card venture.

As revenues from traditional branch banking dry up, banks like Wells are eager to find new cash cows.

Still, there is a substantial chasm between banks like Wells Fargo, which are apparently abandoning branches, and others that are still keen on expanding through banks.

"You are seeing a schism developing between banks that thinks the delivery system of the future will contain brick and mortar branches, and the bank that thinks the delivery will be electronic," Mr. Baer said.

Mr. Baer would not comment on which banks are in those categories.

But investment bankers and analysts said that clearly banks like Wells Fargo and Citicorp are more interested in electronic delivery, and superregionals like NationsBank Corp. and Banc One Corp., which have invested billions of dollars in a traditional system, still would like to acquire more banks.

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