The rush to snap up nonbank financial companies will continue this year as banks search for new sources of fee income, industry observers said.

But the emphasis will shift from asset management and mortgage companies to technology and finance companies, and perhaps even brokerage firms, the observers predicted.

If Mellon Bank Corp.'s 1993 purchase of Dreyfus Corp. presaged 1994's scramble for asset managers, then Microsoft's purchase of Intuit Inc. last year, and its drive to enter the banking industry, is the wake-up call for banks to acquire technology firms.

Likewise, the purchases of finance companies late last year by Shawmut National Corp. and Norwest Corp. could portend a surge in such acquisitions.

"Finance companies are an area a lot of banks are going to be looking at," said Michael Martin, managing director at CS First Boston.

And the prizes may include some captive subsidiaries of banks, like Chemical Banking Corp.'s CIT unit, Mr. Martin said. The money-center owns 40% of CIT, a consumer finance company, but wants to sell its interest.

The real attention, however, will be directed at technology firms, said Gerard L. Smith, director of financial institutions mergers and acquisitions at Salomon Brothers Inc.

"The principal risk to banks as they are currently configured is they are designed to be efficient product deliverers at a time when the users of banks want efficient servicers," he said.

Banks must cement their customer relationships, and to do so they need to offer new and innovative technological services, he said.

"Bill Gates wants to get between banks and their customers," Mr. Smith warned, referring to Microsoft's chairman. "Anything that allows banks to increase contacts with customers will be high on their acquisition list.

"If banks cannot provide integrated statements, someone else will," he said.

The Wall Street pros were less sanguine about asset managers, one of the hot commodities for banks in 1994.

Early last year there were some high profile deals such as First Union Corp.'s purchase of the Lieber family of funds. But the big deals petered out by yearend as the high prices dampened demand, Mr. Martin said.

Two of the biggest prizes that were sold late in the year - Provident Investment Counsel and the Delaware Management Group - went to nonbanks.

"Everyone talks about banks buying money-management companies, but there were relatively few deals last year," said William Weaver, director of financial institutions mergers and acquisition at Lehman Brothers. "I don't see a lot of banks buying money managers in 1995."

In fact, most of the nonbank deals had no auctions, and banks often were excluded because the price was too high, said Hans Morris, director of financial institutions M&A at Smith Barney Inc.

"The high prices have placed an appropriate level of caution on a number of banks," he said. "Banks are looking, but there is a wide difference of opinions on pricing and just an overall tone of caution."

While interest is still alive for asset managers, it has been nearly snuffed out for mortgage companies.

With the mortgage industry experiencing a harsh downturn last year, the flurry of mortgage company deals quickly declined.

Few observers expect much activity, except for those banks, like Keycorp, that are trying to sell their own mortgage units.

Bank purchases of brokerage firms have been relatively rare, but that could change with anticipated congressional attempts to repeal Glass- Steagall, the Depression era law that prevents banks from owning brokerages.

"Large regional banking institutions will want to own outright regional brokerages," said Mr. Martin. If banks are going to have mutual funds and other investment products, he said, banks are going to want to distribute them, too.

Attempting to meet banks' demand to diversify operations, regional investment banks are attempting to broaden their advisory services.

Keefe, Bruyette & Woods Inc., which long restricted its advisory services to a banks and thrifts, has branched into a host of financial services industries. And Alex. Brown & Sons also hopes to also expand its bank advisory practice.

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