Speedy Systems Merger for Banc One, 1st Chicago

Banc One Corp. and First Chicago NBD Corp. have moved quickly on the systems integration front, making several key decisions within five months of their merger announcement.

Their speediness may be aimed at putting to rest any fears that a historical bias-particularly on the part of Banc One-toward running a decentralized operation would linger.

Steven Reid, a partner with Harris Associates, an investment advisory firm in Chicago, said he was "encouraged by the direction that Banc One is going," given that it "has been always been run in a very decentralized manner."

"It is important that they take charge of this opportunity to act quickly and make the cultural changes that will be in the best interest of the bank for years to come," he said.

The new institution, which would be officially formed in October, when the deal is expected to close, would draw on the systems of both banks.

Though the new Bank One would operate as a single organization as soon as the merger is complete, technology officials concede that year-2000 expenses and a wide-ranging set of systems would keep the bank from running on a common computer platform for at least two years.

"It is important to get to some common systems so that we can run the business in a consistent fashion, so we look seamless to the customer," said Ralph C. Bierdeman, senior vice president for integration and conversion services at Banc One. Mr. Bierdeman would report to Marvin W. Adams, chief technology officer at Banc One, who has been named chief information officer of the merged bank.

"How you get there is a real challenge, because you don't want to take a step backward for the sake of getting to a common system," said Mr. Bierdeman.

Despite its best efforts, the new Bank One still would begin life with no fewer than six core deposit systems: an old and a new version of a system provided by Hogan Systems Inc., a division of Computer Sciences Corp., plus systems from Electronic Data Systems Corp., M&I Data Services, Banc One, and the former NBD Corp.

Banc One officials cite Project One, the two-year reorganization effort completed last year, as an example of the bank's seriousness in tackling sprawling systems. The initiative reduced the number of bank units from 59 to 12-one for each state the bank operates in. It also cut the number of check-clearing offices from 92 to 17, and the number of call centers from 26 to two.

One roadblock to swiftly integrated systems may emerge in the form of unanticipated year-2000 expenses. In a survey, released this spring by PaineWebber, of top banks' preparedness for coping with the year-2000 problem, both Banc One and First Chicago NBD were rated below average. Only 39% of First Chicago's applications were year-2000 compliant, and just 25% of Banc One's.

Banc One recently said it spent $170 million in the first half of this year on the year-2000 problem. The bank had previously said it would spend a total of "more than $100 million" on it.

Banc One also faced rising costs related to its acquisition of New Orleans-based First Commerce Corp. last quarter. Expenses topped $170 million, $70 million more than anticipated.

The systems decisions the two banks have made include running commercial lending for large corporate customers on First Chicago's LS/2 from International Business Machines Corp. and Bankers Trust, and running middle-market lending on a system developed by Automated Financial Systems Inc., of Exton, Pa., currently used by Banc One and First Chicago.

The new bank would continue to maintain an outsourcing relationship that Banc One has with First Data Resources for credit card processing. It also would continue to run a system called First Infinity for supporting cardholder accounts, which was developed by First Chicago NBD and Hogan.

Bank One's trust business would run on a system operated by SEI Corp. on behalf of Banc One. A system that First Chicago had been in the process of developing would be scrapped, said Mr. Bierdeman.

For financial management and reporting, the new bank would retain First Chicago's system built with software made by the German company SAP.

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