Decentralization is dying.

The number of subsidiary banks owned by the top 100 U.S. holding companies dropped by more than 25% in the first six months of 1997, driven mostly by the interstate banking law that allows consolidation of charters across state lines.

Major superregional holding companies - from Wachovia Corp. and First Union Corp. in North Carolina to BankAmerica Corp. and Wells Fargo & Co. in California - have been unifying charters and streamlining operations across their multistate empires.

It is as if these fast-growing organizations have spent a year on Weight Watchers, according to data in American Banker's semi-annual holding company survey. They also indicated a halt in branch growth. (See tables beginning on page 7.)

KeyCorp of Cleveland started its slimming-down in mid-1996. It now has four check and deposit operation centers where it once had 18.

KeyCorp's call centers, too, have been reduced, from 10 to 4. And the $69.7 billion-asset company cut 24 commercial and consumer loan and lease centers down to three.

"It was a lengthy process, but it was worth it," said KeyCorp spokeswoman Jennifer Engle. "The benefits way outweigh the costs."

Analysts say the move away from multiple subsidiaries has significantly reduced banks' expenses.

Banc One Corp. of Columbus, Ohio, which arguably had the biggest consolidation job because of its history of allowing acquired banks to operate independently, may be saving as much as $400 million a year from centralization efforts.

The $115.5 billion-asset Banc One has shrunk 88 separately chartered banks down to 12 over three years. And the dieting probably isn't finished. Spokesman John Russell said he thinks Banc One will eventually go to one national charter: "We're just not quite there yet."

The $142.9 billion-asset First Union started its consolidation program only in the first quarter but has already accomplished much of it, said spokesman Ken Darby. Nine banks in eight states and the District of Columbia have been transformed into two banks, he said.

What remains to be done is the folding of the $32 billion-asset First Union National Bank North-covering New Jersey, Pennsylvania, and New York- into the flagship First Union National Bank of Charlotte, N.C.

First Union will keep separate its Delaware subsidiary, which has only $67 million of assets, to take advantage of its ability to sell insurance.

First Interstate Bancorp, now part of Wells Fargo, used to make the argument that there was an advantage to having a board of directors for each subsidiary bank, said Raphael Soifer, a banking analyst with Brown Brothers Harriman. "The boards were a bridge to the local community and they created business for the bank.

"But you can have regional boards without having regional holding companies. And you can have advisory boards that provide a window on the community for the bank," he said.

Consultant Karen Shaw Petrou of Washington-based ISD/Shaw, said, "You don't have to have separate transactions and separate boards of directors. That structure is so costly."

Aside from shrinking the number of subsidiaries, the lineup of the top 100 bank holding companies as of June 30 changed little from a year earlier. Chase Manhattan Corp. held on to first place, with $352 billion of assets; Citicorp remained second, with assets of $304.3 billion; BankAmerica came in third, with $258.4 billion; J.P. Morgan & Co. was fourth, with assets of $250.5 billion; and NationsBank rounded out the top five, with $240.4 billion.

Only Banc One shook up the top 10, jumping past First Chicago NBD Corp. ($112.6 billion of assets) and Wells Fargo ($100.2 billion) into the eighth spot.

Citicorp led the top 100 in deposits, with $198.7 billion, followed by Chase Manhattan with $183.7 billion. BankAmerica came in third with $173.2 billion, and NationsBank fourth with $135.1 billion. First Union came in fifth with $92.9 billion.

The rank of the top five in deposits did change from a year earlier.

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