Through filings recently made with the Securities and Exchange Commission, Wells Fargo & Co. has disclosed its efforts to develop new, low-cost methods of selling banking services.
The plans include moving three-quarters of its branches into supermarkets by the end of 1996.
The goal of the filings was to boost the bank's hostile bid to acquire First Interstate Bancorp. Wells plans to mail the documents to First Interstate shareholders.
But analysts said Wells' business plans are compelling, even if it doesn't succeed with the merger bid.
"Once again, they showed the world that they are really leading the changeover to what will be a newer branch delivery system," said James Rosenberg, an analyst in New York with Lehman Brothers Inc.
No other big bank has ever before changed its branch network from one composed primarily of traditional branches to one composed primarily of supermarket branches, said John Garnett, president of International Banking Technologies Inc. in Atlanta.
Mr. Garnett is in a position to know, since his firm is a leading adviser to banks on supermarket branches. Its clients include Wells and its biggest competitors - BankAmerica Corp., First Interstate, and Union Bank.
According to the filings, 94% of Wells' 615 branches were of the traditional "brick and mortar" variety in 1994. The rest were in supermarkets.
Since then, Wells has been closing traditional branches and opening supermarket branches at a rapid clip. The openings have exceeded the closings. As a result, Wells now has a total of 985 branches. The San Francisco-based bank expects to have a total of 1,075 branches by the end of 1996, not counting possible mergers.
At that point, the bank expects to have only 28% traditional branches, employing an average of 11.7 people.
However, nearly 50% of the bank's branches will be supermarket "banking centers," employing one or two people. The rest will be full-service supermarket branches that employ an average of 6.1 people.
Wells said it costs $880,000 a year to operate a traditional branch, compared with $530,000 for a full-service in-store branch, and $150,00 for a banking center.
As a result, Wells expects its annual branch network costs to decline from $650 million in 1995 to $539 million in 1998. Operating costs per household served are expected to drop 25% in that period, to $169.
Meanwhile, Wells officials said that small-business loan originations have grown from $570 million in 1993 to $850 million so far in 1995. The rise is attributable to a national telemarketing and direct-mail effort believed to be bigger than any ever before attempted by a bank.
Wells also said that it is now providing personal computer banking services to 55,000 customers, compared to 20,000 last year.
Wells said it has invested $175 million in new methods of selling banking services. It expects the investments to show results in both revenues and net income in 1996.
Specifically, the bank predicted 12% growth in net interest income in 1996, driven by a $1 billion growth in loans.
The bank also expects a 12% increase in noninterest income, and a "couple of percent" increase in noninterest expenses. The result is a 12% increase in pretax profits, excluding loan loss provisions.
Many analysts increased their earning estimates as a result of the presentations.
But analysts and bankers also warned that the changes could be risky. For example, Mr. Rosenberg said that Wells could have a substantial increase in loan losses in the next recession because of its nationwide marketing effort in small-business loans.
The retail banking chief of one of Wells' biggest rivals added that Wells could end up losing many profitable retail customers by closing traditional branches and pushing customers into thinly staffed supermarket branches.
"This is a really dramatic withdrawal from traditional branches with consequences that are unforeseen," the banker said.