Zions Bancorp. said it has managed to avoid the deposit runoff expected in the wake of its purchase of Sumitomo Bank of California.

"It's been a very pleasant surprise," said Robert G. Sarver, chief executive officer of the Salt Lake City company's California operation. "Our customer base is extremely loyal, and our employees have kept their great relationships with the clients."

Zions predicted in March, when it announced the Sumitomo deal, that 30% of the deposit base would probably be lost.

Sumitomo Bank of California was renamed California Bank and Trust, and $12.4 billion-asset Zions pushed customers to switch from low-margin certificates of deposit to transaction-based investment accounts.

Deposits dipped about 6% during the summer but are now back up to the pre-merger level of roughly $4.2 billion. About $150 million in CDs have been switched to transaction accounts, Mr. Sarver said.

Analysts were encouraged, saying Zions has cleared an important hurdle.

"The message here is if you treat people well and deliver competitive products, it doesn't matter what sign is on the door," said R. Jay Tejera, an analyst with Dain Rauscher in Minneapolis. "This is a significant positive."

Jumbo CDs-generally those with balances exceeding $100,000-generate small profits for banks, because interest rates are higher and fees less than on more transaction-intensive accounts.

Zions officials had feared that customers who did not want to switch to a money market account would take their deposits elsewhere.

There was also concern that Sumitomo's many customers of Asian descent, representing about 45% of the deposit base, would leave because the institution no longer had a Japanese parent.

But the results since the deal closed Oct. 1 have been heartening, analysts said.

"They will end up with a bigger balance sheet and lower costs, and that is very encouraging," said Joseph K. Morford of Van Kasper & Co., San Francisco.

Mr. Morford predicted Zions would earn $2.75 a share next year. The First Call consensus puts Zions' earnings at $2.69 a share for 1999.

Mr. Tejera said he is waiting for Zions to pass one more test before deeming the California acquisition a complete success: The bank must make more profitable loans.

"The ultimate success of the Sumitomo transaction will rely heavily on their ability to generate a good loan book," he said.

Zions' newly enlarged California bank combines three acquisitions: Grossmont Bank of San Diego, Pacific National Bank of Escondido, and Sumitomo, which was based in San Francisco. With assets of $6 billion, Zions is fifth largest among banks in the state.

California Bank and Trust will open three or four new branches next year, Mr. Sarver said. Expansion plans are in the works for Corona and Century City, both in Southern California, and Alameda County to the east of San Francisco.

Last week, in a Securities and Exchange Commission filing, Zions said it would take a $25 million charge in the fourth quarter to cover the costs of the Sumitomo acquisition.

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