Wells Fargo & Co. continued to pad its lead in the race to win First Interstate Bancorp after a series of meetings in New York City with investors and analysts.

Wells Fargo stock, up by as much as $2.25 in early trading, closed 12.5 cents lower, to $218.375 on Thursday, dragged down by heavy profit taking in the bank sector.

At the close of trading, Wells' hostile bid was worth $145.66 per First Interstate share, and First Bank System Inc.'s friendly offer was worth $133.58 per share. It was the first time the spread between the bids has been in the double digits.

In mid-November, the bids were roughly even. First Bank shares fell $1.125 to $51.375.

Wells detailed its cost-cutting plans, revealing for the first time that it planned to eliminate 85% of Interstate's 431 California branches.

First Bank's chief financial officer, Richard Zona, began to fire back at Wells, questioning the "curious timing" of the presentations to analysts.

"The fourth quarter is ending, and suddenly they are leading analysts toward higher earnings," said Mr. Zona, whose bank had faced charges by Wells that it was using a share buyback program to artificially inflate its stock price.

In any event, Wells appeared to be gaining favor among analysts who met with Wells executives.

"Over the past week, we have had the chance to meet with the CEOs of both First Bank System and First Interstate," said Lawrence Vitale of Bear, Stearns & Co. "As good as the First Bank bid is, neither company seems to have acknowledged the possibility that Wells Fargo's earnings might be substantially better than consensus expectations, or how the market may react to that possibility," he added.

"The better (Wells') earnings prospects, the higher its stock is likely to go, and therefore the better its bid is likely to look relative to First Bank's," he said.

Mr. Vitale raised his 1996 earnings estimate on Wells to $23.50 from $20 per share. Keefe, Bruyette & Woods Inc. analyst David Berry also raised his 1996 estimate, to $23 from $22.

"It was a very impressive presentation," said David Berry, who dined with Wells Fargo executives Wednesday night and upgraded the bank to "attractive" from "hold" Thursday morning.

In his talks with investors, Wells chief executive Paul Hazen sought to dispel statements made to analysts by First Bank chief executive John Grundhofer and First Interstate chief executive William E.B. Siart, that Wells' largest shareholder, Warren Buffett, was uncomfortable with the hostile nature of its bid.

Mr. Berry said the Wells CEO offered Mr. Buffett's work phone number to the analysts present at the dinner if they doubted the billionaire investor supported Wells' efforts.

The meetings with analysts Wednesday night and Thursday morning focused primarily on Wells' efforts to improve its retail delivery system. The bank said it would cut 20% off of retail costs by 1998.

Wells also touted its exclusive rights to put mini-branches in four of California's five largest supermarkets.

These alternative delivery systems will provide displaced First Interstate customers a place to bank, Wells said. As a result, the deposit runoff normally expected with closing hundreds of branches will not occur, said Merrill Lynch & Co. analyst Sandra Flanagan.

But Mr. Zona scoffed at this idea, and called Wells' massive branch closure strategy risky.

He also predicted that sentiment could soon shift in First Bank's favor, saying that investors he talked to were increasingly concentrating on the $8 billion of goodwill the Wells transaction would create to drag down reported earnings.


Bank stocks were hit hard Thursday as profit taking ate away at some of the sector's massive gains this year. Thursday, the Standard & Poor's 500 index of top banks fell 2.22% as investors took profits, said Henry Dickson of Smith Barney.

Money-centers were particularly hard hit. Citicorp shares fell $2.75 to $69.75, Bankers Trust New York Corp. declined $1.875 to $66.375, Chemical Banking Corp. dove $2 to $66.50, and BankAmerica Corp. stumbled $2.50 to $59.875.

- Barton Crockett contributed to this report.

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