At San Francisco-based Montgomery Securities, banking analyst J. Richard Fredericks regards technology as the most crucial factor in the industry's future.

Mr. Fredericks, chosen by bankers and investors as the best analyst following large regionals, says technological innovations will make larger banks more efficient through economies of scale and spur growing difficulty for smaller banks.

That will reverse a long-held industry tenet, often a rallying cry for smaller banks, that bigger is not better. But it does square with Mr. Fredericks' own Darwinian view of the future of banking in a far less regulated business environment.

It is, of course, adapted from the famous theory of natural selection postulated in 1859 by Charles R. Darwin, the English naturalist. The concept: survival of the fittest. Mr. Fredericks thinks the strongest banks, in terms of their capital, management and technological edge, slowly will gain predominance and consume the weakest banks.

"Size now has real importance," he said recently. "Pure size by itself is going to be a contributing factor to success going forward."

Successful banks are going to have to investment in technology and its applications "steadily over a long period of time," he thinks.

Those that do will fit his Darwinian model. Those who can't or don't "will ultimately face the risk of losing out in a very big-time way."

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