Wells Fargo & Co. expects to settle antitrust issues in coming weeks from its planned merger with First Interstate Bancorp.

San Francisco-based Wells does not yet have agreements with the U.S. Justice Department or the California attorney general on how many branches it would have to sell to avoid violating antitrust rules.

Sources close to Wells who asked not to be named said it expects to complete agreements with the regulators within several days. By the end of the month, the bank hopes to have lined up buyers for the branches. The sales would then close shortly after the merger is completed in April or May.

The divestitures are likely to be the largest in California since BankAmerica Corp. divested itself of 48 branches with nearly $2 billion of deposits in 1992, as part of its acquisition of Security Pacific Corp.

Some modest changes have occurred in Wells' estimate of what it must divest, according to the sources.

When Wells officials first announced a hostile takeover bid for Los Angeles-based First Interstate, they figured that they would have to divest $900 million of deposits and that the communities most affected would be Sacramento, Bakersfield, and San Diego.

But those estimates were made before Wells officials had seen First Interstate's books and had talked to the Justice Department. Now they're estimating slightly more divestitures - about $1 billion of deposits.

Sources close to the company added that it hopes to keep San Diego off the list of areas with substantial branch sales.

Instead, Wells expects that about half the divested branches will be in the Sacramento and Bakersfield areas. The rest will be an odd-lot collection in small towns throughout the state, a knowledgeable source said.

A wide range of institutions are seen as potential buyers, including midsize banks such as Sanwa Bank California, Comerica Bank California, and U.S. Bank of California.

Big western thrifts with an interest in bank acquisitions may also come forward, including Glendale Federal Bank, Cal Fed Bancorp, Great Western Financial Corp., and First Nationwide. An out-of-state buyer is also possible.

Union Bank, the Bank of Tokyo subsidiary that will rank as the state's third-largest financial institution after the Wells/First Interstate combination, is unlikely to be in on the bidding, however. The bank is said to be too occupied with its pending merger with Bank of California to be terribly interested in picking up a big package of branches.

Indeed, Union Bank last week announced plans to close 21 branches statewide by next fall. A total of nearly 700 people work in the branches that will be closed and in the branches that will be assigned to pick up the slack for the closed offices, the bank said.

But job losses will be minimal. Only about 40 layoffs are expected because of a need for more employees at the remaining branches and a hiring freeze, said Union vice chairman Richard Hartnack.

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Once Wells finishes absorbing First Interstate, a man who might have an idea about its next step is former CSC Index Inc. consultant Frank Petro.

Mr. Petro joined Wells in January as executive vice president of strategic planning, reporting to Wells president William F. Zuendt.

He previously was a senior vice president in San Francisco for CSC, which is noted for its corporate reengineering work with consultant Michael Hammer.

A former associate of Mr. Petro said that at CSC he had been responsible for building a Pacific Rim practice, and also for helping companies assess changing customer needs as they reengineered. His practice spanned many industries, and he was not a financial specialist.

The associate said that Mr. Petro would be an ideal person to help Wells find ways to keep First Interstate customers after the merger. He may also be a great help in improving marketing and cross-selling efforts.

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On the subject of retaining customers, Wells is already starting to get a taste of what's in store after the merger.

Glendale Federal Bank, which has made a name for itself by attacking the state's biggest banks in its advertising, is focusing its $15 million annual advertising budget on Wells Fargo.

The bank started running humorous radio ads about the combination the day the merger was announced. In the ads, a woman tries to tell a fable about how "King Interstate the First" has had its kingdom taken away by a "giant ... on a Wells Fargo wagon," while her lawyer tries to restrain her from talking.

Print ads, which started appearing last Wednesday, say that "Wells Fargo will spend over $11 billion for First Interstate. Guess where they're going to get the money."

Last Thursday, Glenfed branch employees were told to start approaching Wells customers directly in what the thrift calls "guerrilla marketing." A branch in San Mateo was planning to hire a stagecoach to circle a rival Wells Fargo branch, a Glenfed spokesman said. Glenfed has also offered to pay people $6 a month for six months to switch accounts.

The thrift's push comes just after the loss of one of the architects of its distinctive marketing approach. Marketing director Clark Collins left last month to work for Bank of America as head of consumer loan marketing.

Meanwhile, Chatsworth, Calif.-based Great Western, a $44 billion-asset institution that ranks as the country's second-biggest thrift, announced the hiring of former Midlantic Bank executive Dean W. Hatton as senior vice president of a new direct banking organization.

Mr. Hatton, 35, put together Midlantic's centralized telephone service operation before the bank's merger with PNC Bank Corp. At Great Western he is charged with improving telephone services and also with introducing personal computer banking services.

The hiring was said by executives to be consistent with the thrift's push to become more banklike.

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