A New Deal for First Interstate : Strengths and Weaknesses
First Interstate Bancorp of Los Angeles has agreed to be purchased by Minneapolis-based First Bank System Inc. in a $10.1-billion stock-swap deal. What the banks have going for them and what they don’t:
* Geographic diversity. Has 1,148 offices in 13 western states, providing it with a strong supply of deposits.
* Overcame loan problems of the early 1990s by improving its credit process and changing to a more retail and consumer focus.
* Improved earnings in 1995 through robust loan growth and improved net interest margins.
* Well-known name that would be adopted by acquiring bank.
* Big staff. Despite recent layoffs and restructuring, remains heavily staffed at 27,901 employees.
* Faces risks through loans to consumers and still-struggling industries in Southern California.
FIRST BANK SYSTEM
* Strong profits. Last year posted net income of $420 million. Has experience in integrating companies--it has made 23 purchases in the past five years.
* Among the most efficiently run banks in the nation, with low operating costs.
* Large credit card operation. Also operates a fast-growing and lucrative division that runs credit card operations for larger retailers.
* With 366 offices in 11 states in the Midwest, lacks a large branch system and needs to boost the size of its consumer bank deposits.
* A common name. First Bank has often had to adopt different names in new markets--such as Colorado National Bank--to avoid lawsuits from existing competitors with similar names. The merged bank would be called First Interstate.