National City Corp.'s stock has plummeted 14% since the bank agreed in October to buy Merchants National Corp., Indianapolis, for a hefty $564 million. It's up to Vincent A. DiGirolamo to prove the Clevelandbased holding company won't be overpaying.

Mr. DiGirolamo was recently put in charge of a team whose mandate is to slash Merchant's annual operating costs by $30 million, or 15%, within the next two years. His goal is to raise Merchants' profitability to a 1.1% return on assets from an anemic 0.68%.

That won't be easy. "Nineteen-ninety-two will be a very stressful year," Mr. DiGirolamo acknowledged.

Fulcrum for a Career

Mr. DiGirolamo, 54, had beem chairman and CEO of the company's Akron bank. Now he is the merger liaison and one of growing number of executives responsible for making good on the optimistic projections used to justify the wave of mergers sweeping the banking industry.

It's a formidable challenge, one that can make or break a career.

Timothy P. Hartman, for example, saw his star rise at NCNB Corp. because of his success at molding the failed First RepublicBank Corp. into a well-oiled and profitable machine.

But Dennis C. Bottorff saw his golden-boy reputation fade because of problems he encountered merging Sovran Financial Corp. with Citizens and Southern Corp.

No Invitation

He was not offered a position in NationBank, the entity to be formed through NCNB'S takeover of C&S/Sovran Corp.

Mr. DiGirolamo is no stranger to the merger game. Seven years ago, he successfully melded Banc Ohio National Bank into National City's Akron bank, eventually doubling the combined entity's size and profitability while trimming its work force by roughly 10%.

It was this performance that earlier this year propelled Mr. DiGirolamo to the head of a companywide efficiency project, dubbed Vision, aimed at cutting National City's annual operating expenses by up to $100 milion, or 10%.

Appointment Supported

"Vince seems to be the right guy for the job at Merchants National," said Elmer Meszaros, a bank analyst with Roulston & Co., Cleveland.

Though the merger will not be official until June 1992, Mr. DiGirolamo already is making his presence felt at Merchants National.

Coincident with his arrival in Indianapolis, the president of Merchants' lead bank resigned, and the president of the parent company announced early retirement.

Ultimately, Mr. DiGirolamo expects to cut about 600 positions from Merchant National's work force of 3,500 people.

Less Need for Officers

"When you integrate certain functions, the need for high-caliber officers goes away," he said.

Almost all projected cost savings will flow from work force reductions. Annual salaries and benefits will be slashed by $21.5 million, or about 21%.

National City hopes to cut related employee expenses for items such as lighting, phones, and computers by $5 million.

Integration is the glue Mr. DiGirolamo is counting on to keep Merchants National together amid the employee shakeup.

Centralizing Operations

For example, the $5.8 billio-asset company's 17 banks will be merged into one unit. Data processing operations will be shifted to National City's Cleveland headquarters, as will the administration of credit card, mortgage, and trust units.

"Every function you can think of will be integrated," said Mr. DiGirolamo.

His concern - and one shared by analysts - is that customers will be driven away by turmoil.

"Regardless of how much you communicate, consolidation is disruptive to employees, and in turn somewhat disruptive to customers," said Mr. DiGirolamo.

The sensitivity of the issue recently was brough to light by Edward Brandon, National City's chairman.

In an open letter to employees, Mr. Brandon noted an Office of Consumer Affairs study showing that the average unhappy customers complains to at least nine acquaintances, and 13% of angry customers will tell more than 20 people.

And although 96% of unhappy customers never complain to management, 91% of them will turn away from offending companies.

Of course, that's just what National City's competitors are hoping will happen in Indiana.

Competition Abundant

Not only do Banc One Corp., Columbus, Ohio, and INB Financial Corp., Indianapolis, have franchises of almost equal size in the state, but NBD Bancorp, Detroit, and Fifth Third Bancorp, Cincinnati want to expand budding operations there.

"Obviously, Vince can't afford to let service decline in any significant fashion," said Fred Cummings, a bank analyst with McDonald & Co., Cleveland.

The low-key executive joined National City's predecessor bank in Akron as a loan collector in 1960 and worked his way up to become president of the unit in 1981.

He has deep roots in Akron. Civic ties range from the local hospital, a private high school, two local colleges, and Boy Scouts of America to the town's symphony, music center, and ballet.

Decide, Act, and Relax

Mr. DiGirolamo graduated from the Stonier Graduate School of Banking in 1973 and holds an undergraduate degree from Ohio University.

The executive is known for his positive outlook and says his style is to take swift action on matters within his control and avoid worrying about the things that are not.

"The best thing is to develop a plan, implement it, then get on with your life," Mr. DiGirolamo said.

The first secret to increasing productivity is finding loyal achievers and pointing them toward specific goals, said Mr. DiGirolamo.

Some Investors Distressed

However, some investors are not waiting around to see if Mr. DiGirolamo succeeds.

Decrying an estimated 8% earnings dilution and 5% equity dilution stemming from the deal in 1992, the State Teachers Retirement System of Ohio has dumped its entire National City stake, which as of June 30 totaled 1.5 million shares, or 2.5% of the company's outstanding stock.

And Los Angeles-based NWQ Investment Management Corp. has vowed to vote its 1.4 million National City shares against the Merchants National acquisition.

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