First Interstate to Keep Focus on the West : Banking: L.A. financial giant says it will become a ‘super-regional’ rather than expand nationally.

First Interstate Bank gave securities analysts a glimpse of the company’s expansion strategy Tuesday, declaring that it will focus on saturating markets in the West during the 1990s rather than seeking to use new federal laws to build a nationwide banking empire.

Edward Carson, chief executive of the Los Angeles-based financial giant, told analysts meeting in New York--some of whom had suspected grander designs--that the nation’s 14th-largest bank will concentrate instead on becoming a “super-regional bank.”

The company also confirmed previously reported plans to lay off at least 1,200 workers, but it said the impact on the Southern California economy will be softened by moving some of its out-of-state jobs to local facilities.

Many of the employees who will lose their jobs work for banks in Washington, Texas and other states where First Interstate has been on an acquisition binge over the past 18 months, Carson said.

He said the company doesn’t know how many of the 9,300 First Interstate employees in California will lose their jobs. The total, including about 1,800 early retirements, will amount to more than 10% of its 28,000-member work force.

First Interstate will take a third-quarter charge of $139 million to cover its current restructuring costs, and it will take another $26 million in restructuring charges over the next year.

The bank said the impact of the layoffs on Southern California will be largely offset by the relocation of some operations into the region. For example, a spokesman said, “a few hundred” jobs in the bank’s trust department, now scattered across several states, will be moved to Calabasas.

Such consolidations will be done more easily under the interstate banking legislation recently enacted by Congress. Previously, banks that wanted to operate in more than one state were, in effect, required to set up a separate entity in each state.

First Interstate’s aggressive campaign to purchase out-of-state banks over the past few years has led some analysts to believe that the bank would try to become a nationwide concern after the barriers to interstate banking fell.

But Carson said in a phone conversation Tuesday, “My guess is that we’ll be a . . . super-regional bank” five years from now.

Remaining a regional bank will also allow First Interstate to keep a close eye on its operating costs. Carson said First Interstate’s expenses will go from 62.7 cents out of every dollar today to about 58 cents by next year.

Such a reduction would push the bank’s costs below those at Bank of America, the only California-based bank bigger than First Interstate.