A top policy analyst warned Thursday that recently proposed megamergers are likely to flop because they are based on unrealistic assumptions.

"You really have to wonder how well these consolidated institutions can do for shareholders," said Karen Shaw Petrou, president of the consulting firm ISD-Shaw Inc. and a former BankAmerica Corp. vice president.

Speaking to the National Economists Club, Ms. Petrou said the deals rely on overly aggressive cost-cutting plans and assume consumers are willing to use a single institution for all their financial services needs. Banks are promising 40% cost savings in recent deals, she said. That is double the savings banks were promising from deals just three years ago, she said.

Also, far more deals today are out-of-market mergers, such as NationsBank Corp. and BankAmerica Corp., she said. The opportunities for savings in these deals are far less than in-market mergers.

Ms. Petrou also questioned whether consumers want financial behemoths. Wells Fargo & Co. lost 12% of First Interstate Bancorp's customers after it took over the Los Angeles-based bank, she said. Also, National Westminster Bank and Barclays Bank have spun off their United Kingdom-based securities affiliates, finding little synergy with their banking units there, she said.

Ms. Petrou also questioned whether banks seeking to reduce costs by 40% will be able to afford staffing each branch with people qualified to sell banking, securities, and insurance products. "It is very hard to be all things to all people all the time," she said.

Ms. Petrou said recent deals are driven by institutional investors, who are parking cash in bank stocks in the expectation of even more consolidation. "There is a conviction that not only must banks merge but that they will merge," she said. "This has created the assumption among institutional investors that they will get rich investing in bank stocks."

As a result, bank stock prices have skyrocketed to levels not supported by potential future earnings. Ms. Petrou said this "speculative bubble" will eventually burst.

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