PNC Bank Corp. chairman Thomas H. O'Brien is on a mission to reinvent his bank.

In a recent interview in his office overlooking downtown Pittsburgh, Mr. O'Brien, 59, explained how $72 billion-asset PNC plans to become a major national consumer bank without adding branches.

One key is a 10-year contract with the American Automobile Association to sell credit cards to its 34 million members.

Others are the expansion of PNC's network of 2,000 automated teller machines and the creation of a 750-employee telephone banking center in Pittsburgh. With these systems, Mr. O'Brien said, there will be no need for more bricks and mortar.

"People do business now by telephone," he said, adding that PNC has invested $20 million in its phone center.

What Mr. O'Brien envisions for PNC is a "virtual" bank in which customers throughout the country are served by electronic linkups rather than an extensive branch system.

This bold stab at reinvention has made PNC a bank that others are watching - if only to see whether they can pull it off.

"PNC understands what they need to do; what the successful bank of the future looks like," said Michael Durante, an analyst with Cleveland's McDonald & Company Securities. "But right now, it's all on paper," he said.

Nearly 120 branches have been closed and 2,000 jobs cut since late last year - largely because of the acquisition of Midlantic Corp. - and another 10 are scheduled to close by yearend, all despite the objections of Pennsylvania lawmakers.

To compensate, PNC has expanded its ATM network to 2,000 machines - adding 550 in convenience stores in the past year and a half, with another 100 to be installed by yearend. PNC became one of the first major U.S. banks to charge noncustomers fees for using its ATMs. That move also has drawn the ire of legislators, who have threatened to outlaw the practice in Pennsylvania.

Despite the negative reaction that other banks have received over teller fees, PNC established its own $2 fee to discourage people from using branches.

In addition to the branch closings, the company is evaluating which back-room operations to centralize. In July, PNC finished consolidating its 26 loan underwriting offices into one, in Pittsburgh.

Along with the cost cutting, the company has dreams of expanding beyond its base in the Rust Belt states and the Northeast.

Mr. O'Brien said PNC wants to be a national player on the consumer front while eschewing its traditional path of growth by acquisition.

Just last year, PNC entered the New Jersey-Philadelphia market, buying 84 branches of Chemical Bank. In the same year, it also completed its $3 billion purchase of Midlantic. These acquisitions added $17 billion in assets to PNC and gave the bank a consumer operation that sprawled from New Jersey to Kentucky.

For now at least, Mr. O'Brien has sworn off bank acquisitions. "There aren't many more national fits for us where we can take expenses out," he said. "To go out and buy banks ... we don't see that in most cases being particularly attractive."

However, he would consider acquisitions of specialty businesses. "I think you'd see us doing a series of business segment acquisitions that add a particular product enhancement or human resources ability," he said.

As part of the effort to become an electronic bank, PNC launched an initiative nearly two years ago to reduce its branch network by 30%, and has brought the number down to 840. Mr. O'Brien said he envisions a virtual bank that could add as much as $20 billion of assets by the end of the decade.

Analysts say it's a neat idea, but largely untested.

"What the company is doing right now is all it can do," said George Bicher, an analyst with Alex. Brown & Sons Inc., "but it's like turning a battleship."

Mr. Durante of McDonald & Co. added that the investment community has lost confidence in Mr. O'Brien because of past mishaps, including PNC's formerly problematic derivatives portfolio.

"He has survived in his job despite some pretty significant disappointments," Mr. Durante said.

Mr. O'Brien, who has been chief executive for 11 of his 34 years with the company, has indeed weathered a storm. Socked by real estate loan losses and the ownership of interest rate sensitive securities - which led to large writeoffs in 1994 and 1995 - PNC's management lost face with analysts, Mr. Durante said.

But this is the new PNC, Mr. O'Brien insisted. The asset base, which once was 45% securities, is shifting toward a more balanced mix, and the company has more core deposits because of the acquisitions of Midlantic and the Chemical branches. The securities portfolio today makes up only 22% of total assets, and Mr. O'Brien would like it to be 15%.

"Essentially, that's all behind us," he said, referring to PNC's balance sheet problems. "It's fixed once and for all."

PNC does have its fans. Even though analysts said it's too early to tell the benefits of the AAA contract, some are recommending buying PNC's stock based on it.

"PNC has a very attractive long-term growth opportunity," Prudential Securities analyst Ruchi Madan wrote in a recent report.

Merrill Lynch & Co. analyst Sandra Flannigan agreed. "PNC has the ingredients to become among the industry's highest-return companies on a risk-adjusted basis," she said.

Like its crosstown rival, Mellon Bank Corp., PNC is an old-line bank that made its name in corporate lending rather than consumer banking. But Mr. O'Brien believes 75% of PNC's revenues eventually will be driven by consumer business.

Even Mellon, a mainstay of traditional banking Pittsburgh-style, has sought to steer a radically different course by moving aggressively into supermarket banking.

PNC sees its future in the 34 million motorists belonging to the AAA's member clubs. The bank plans to use the club mailing list to market auto loans, mortgages, checking accounts, and investment products. (PNC is the country's second-largest bank mutual fund provider behind Mellon.)

Though PNC's competitors - some of which were also bidders - say it overpaid for the contract, Mr. O'Brien insists AAA picked his bank because of its hefty spending on technology.

The bank has not divulged terms of the deal, but analysts say it must have been generous to wrest the contract from its previous holders, Mellon and Banc One Corp. So the pressure is on PNC to make the most of its access to the AAA membership list.

The biggest problem, Alex. Brown's Mr. Bicher said, is cross-selling banking products to AAA customers. Other companies, notably banks and finance companies, have had a hard time exploiting customer relationships to sell more than one product.

Will PNC stick to its game plan and not buy another bank? Mr. Bicher is skeptical. The whole retail strategy is premised on a cobranded credit card and investments in more teller machines and phone service.

"Many banks pay lip service to alternative delivery and new products, and this is a great beginning," Mr. Bicher said. "The problem is getting customers to accept changes overnight."

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