Wachovia Corp. made it official last month: Leslie M. "Bud" Baker Jr. will replace John G. Medlin Jr. as chief executive officer on Jan. 1. Mr. Baker, 51, was already the clear heir apparent, since he was named president and chief operating officer earlier this year.

As the day when Mr. Baker takes over draws closer, more attention is being paid to the man who will soon be running one of the nation's most highly regarded banks. Can any changes be expected under his leadership?

Probably not, at least not anytime soon. During a recent interview, Mr. Baker hewed closely to Wachovia orthodoxy. Wachovia will continue to expand its mutual fund sales slowly and cautiously approach any future acquisitions, he said.

Mr. Baker comes across as a man more likely to fine-tune the Wachovia organization than lead it in bold new directions.

As a career Wachovia employee, steeped in the North Carolina bank's proud corporate culture, Mr. Baker probably wouldn't want it any other way.

Mr. Medlin once described Mr. Baker as having "blue Ws running through his veins, " an allusion to Wachovia's corporate logo. In any case, Mr. Medlin is likely to remain for up to two years, looking over Mr. Baker's shoulder, as chairman.

At the same time, Mr. Baker's thoughtful, articulate commentary proves he's his own man, with a keen eye for operational details and his own way of looking at the world.

Q.: Wachovia has not been as aggressive about selling mutual funds as some other banks. Why the apparent reluctance?

BAKER: I will accept the charge that other people have moved ahead of us, and I think that's fine.

We feel these products are somewhat interesting in that. they have some risk to them. They are not government-insured CDs backed by the capital and strength of Wachovia Bank.

We might be willing to forgo a little volume here and there to be sure that customers are well served and that they are absolutely, superbly pleased with their overall relationship with Wachovia.

Our interest is probably not so much in selling a customer a mutual fund tomorrow as it is in having that customer 10 to 15 years from now.

So any reluctance you sense is probably a reflection of some realism in looking at the market, a sense that there is plenty of time there's going to be a lot of money moving around in this decade and the next, and plenty of room for people who will do things correctly and then come aggressively to the market.

We're selling mutual funds and investment products now through the branches. We just haven't completed our staffing and training to have a person in every branch.

Q.: When do you expect to have this accomplished?

BAKER: I think we'll be well along by midpoint of 1994.

Q.: Does Wachovia have any interest in buying a mutual funds company, as some other banks have done?

BAKER: We have a good investment capability in our company. We have a big trust operation. But I would not preclude Wachovia looking at opportunities. We don't have any plans to do it right now. But I wouldn't say it's the wrong thing to do for other people or for us at some point.

One of the things that banks will have to have in the future is a good investment capability. You'll have to have a broad array of products. And they'll have to be competitively performing products.

Q.: Do you think mutual fund companies are overpriced right now?

BAKER: I would guess those companies are fully priced, and it would be difficult to find the point at which they add value.

You have to look at those things and say there's probably a saturation point that gets reached somehow. It's either there is only a certain number of people who will send their money to those things, or they kind of reach all those people and they can't get any further out.

One of the problems for them is, what do they do in the future? Because clearly, banks are gearing up in this area and if you wanted to go out and build that capability on your own, you could probably do it.

Q.: Mr. Medlin has been quoted as saying branch networks are becoming obsolete. Do you agree?

BAKER: I would find myself in agreement with it up to a certain point, when you start asking: which ones should we close? You'll get to a point where you'll say, well, I'm going to close this office and I'm going to abandon this share of the market to someone else without a fight. I'm just going to hand it over to my competition.

Or you're going to be looking at a situation in these branches where, because you don't want to spend money on them, you don't want to staff them, you're going to decrease your revenue

And so you say, gosh, I don't know, we didn't pay very much for that branch, it's been there a long time, why don't we just leave it?

So it's a very interesting area. Mr. Medlin's point was a very good one, that the typical neighborhood branch has the possibility of becoming obsolete.

And I think that is the way you should view them, in the sense that they should be looked at each year as part of the ongoing operation. Is it still an economically viable operation?

What I think many of us will find is that we don't need them quite the way we used to need them. In other words, they started out as places where you gather deposits.

Well, it's not clear you need them so much to do that anymore, although they still are a good source of new relationships.

What our studies show is that customers have now reached a point where they're not so concerned about convenience as they once were. What consumers are now telling us is that they're willing to drive downtown to get a complicated transaction done, if that's where they can get the help.

On the other hand, they still tend to open their accounts at the nearest branch.

Our studies also show there's an increased sophistication on the part of the consumer that banks probably don't yet appreciate in terms of their increased willingness to use technology. The consumer is actually rather flexible in his or her thinking about that.

The one factor that's interestingly present in all the interviews that we do with customers is that at some point, they want to talk to a human being. And they want that human being to care about their concerns and to be able to help them.

So I think the answer is in balance somewhere. If you're a bank like Wachovia, with a cost structure that is already more favorable than many others, I think you might be ill-advised - as long as your branches are located in good markets - to go out and start dismantling them.

But what you might be well advised to do is start fine-tuning that capability. Maybe someday, instead of having 18 branches in Winston-Salem, we'll have five big ones and 10 little ones and you'll do different kinds of things there.

Q.: Have you looked at supermarket branches?

BAKER: We've looked at supermarket branches in the past and never felt like they made sense to us. But I must admit, what other banks have done looks very interesting.

Q.: Do you think it's important for Wachovia to expand via acquisitions, given that branch networks may be less valuable in the future?

BAKER: Wachovia, all along, has been characterized as being somewhat slower than other companies in making acquisitions. I think our course, for us, has been correct.

I take a dim view of mergers where you dilute the return to your shareholders. It's not been entirely demonstrated that it makes a lot of sense for a bank to go out and do an acquisition that is dilutive to its shareholders unless some other value can be brought to the transaction.

I think the reason for us to grow would be to identify good markets where we can come in and provide a superior service, where some economies can be achieved, and where we can add more business to the overall structure.

You can go in and say, yeah, we're going to do this transaction but we're going to get it back through savings. Well, what you're going to find is you're going to make reinvestments into the franchise to bring everybody up to the the same system.

I suspect the way you ought to look at these things is you ought to say, well, there could be some savings, but we are going to reinvest that back into the company and build our capabilities to deal with those customers.

So you really do have to look at that cost, or, that investment, and it has to be offset by the business you can do in the future.

And this thing of buying someone based on past earnings is no longer relevant because past earnings don't mean much any more in a future where deposits are streaming out to mutual funds and no one is borrowing money.

Q.: If you did expand, would Virginia be the place?

BAKER: I'm from Virginia originally. It would be nice if my father could bank with us, but I don't know if that will happen anytime soon.

Q.: In the past Mr. Medlin has indicated a lack of interest in Florida. Do you feel the same way?

BAKER: I do. Florida is a highly competitive state. You're going into a state where there's some very fine banks already operating, very well entrenched, and you have to go in there and think about carving out a living in the midst of all that. I think it would not be high on our list.

Q.: There have been signs lately of the national economy picking up. Do you expect a resurgence of loan demand next year?

BAKER: I probably remain a little more pessimistic than most people. I'm beginning to feel a little lonely because everyone out there is talking about recovery and things being quite good next year.

I think next year will be very much like this year. We're enjoying good car sales and truck sales right now, but there are a lot of people who haven't bought cars since Ronald Reagan was President.

I would expect some modest growth in credit, but nothing outstanding. And all over America I suspect there are bank presidents who have promised their boards of directors substantial growth in earnings and credit and they're now wondering where they're going to get the loans to drive that income.

It is a restrained and challenging environment, but it's one that I, quite frankly, see with some enthusiasm. I enjoy competition, and I like the thought of a good, rough battle over the next few years.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.