In a deal that would more than double its Chicago retail network, TCF Financial Corp. said Monday it would replace BankAmerica Corp. as the operator of 76 branches in Jewel-Osco stores.

The agreement, which is to close Jan. 30, does not require Minneapolis- based TCF to pay any money to BankAmerica, which had signaled its desire to end its Chicago-area supermarket involvement.

BankAmerica took a $112 million charge in the third quarter to cover expenses related to ending its contract with Jewel. Analysts said part of that sum was paid to the grocery chain.

Jewel, in turn, has agreed to pay TCF a similar, undisclosed amount to assume control of the in-store facilities and 178 automated teller machines now run by BankAmerica.

In exchange, TCF has agreed to open 11 more Jewel store branches in 1998 and another 25 each year until there is a TCF branch in nearly all of Jewel's 184 Chicago-area stores.

TCF's existing Illinois operation, plus the 76 BankAmerica facilities, would comprise 124 locations. This would be the fourth-largest branch network in Chicago, behind First Chicago NBD Corp., Bank of Montreal's Harris Bankcorp unit, and ABN Amro Holding.

TCF would also have the second-largest ATM network, with 472, trailing only First Chicago.

At the time it took its charge, BankAmerica said its Jewel branches were unprofitable.

The in-store offices hold only $115 million of deposits and will not add materially to TCF's $3.5 billion of Chicago assets, but the branches and ATMs give TCF a way to expand geographically without the heavy cost of acquiring a bank.

"We've done very well in supermarkets, and we've done particularly well in Chicago supermarkets," said William A. Cooper, TCF's chairman and chief executive officer.

Mr. Cooper noted that there is no cost to assume the branches: "We get deposits, leasehold improvements, and 186 ATMs for free. And we've been given subsidies to start out."

The company does expect to incur significant costs in assuming the branches, which would dilute 1998 earnings by 1% to 1.5%, Mr. Cooper said.

The branches should be profitable by 1999, and Mr. Cooper predicted they would contribute deposits of $750 million to $1 billion in five years. TCF also expects to retain 900 employees who now work in BankAmerica branches, Mr. Cooper said.

Karen Ramos, a spokeswoman for Jewel, said other banking companies bid on the contract, but she declined to say which ones or how many.

BankAmerica opened its Jewel branches about two years ago and committed itself to aggressive expansion. The move was viewed as unusual because the San Francisco-based banking company had no traditional retail branches in Chicago. In the end, BankAmerica officials said the lack of a recognizable brand name made it tougher to attract customers.

Analysts said TCF, with its existing Chicago base, a popular free checking account, its experience with supermarket banking, and its focus on middle-class and blue-collar customers, is more likely to succeed than BankAmerica.

"The fact BankAmerica didn't do well with these branches doesn't necessarily mean TCF won't do well," said Dain Bosworth Inc. analyst Ben Crabtree. "We see TCF targeting a different group of customers."

Joseph Duwan, an analyst at Keefe, Bruyette & Woods Inc., said the deal is a good strategic move for TCF. "I think there's great potential in the Chicago market for them," he said. "It does increase their growth rate potential."

Mr. Cooper said the average TCF supermarket office becomes profitable within 18 to 30 months, and "virtually" every mature supermarket location is more profitable than traditional branches.

"BankAmerica wasn't in this very long to conclude whether they could make it work," he said.

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