The Wells Fargo-First Interstate Merger : Impact of the Deal

L.A. Times Archives

Jan. 25, 1996 12 AM PT

Wells Fargo & Co.’s planned $11.6-billion acquisition of First Interstate Bancorp would result in California losing another bank, part of a long trend of consolidation in the banking industry. A look at how the deal could affect customers, employees and shareholders, and look at the state of California banking:

CUSTOMERS

The biggest impact on consumers from Wells Fargo & Co.’s hostile takeover of First Interstate Bancorp may well be the loss of convenience caused by branch closures. While Wells executives were vague about their plans to retain customers, analysts predicted a media blitz by smaller thrifts to lure those who bank at Wells Fargo and First Interstate away from the combined institution.

* Shuttering banks: Although Wells plans to close 350 offices in California, the combined bank promises to eventually offer customers more total locations. Wells is also a technologically savvy organization and may try to make up for the loss in convenience by giving customers the choice of banking at supermarkets, by telephone or over the Internet on Wells’ World Wide Web site.

* Checking/savings accounts: Because Wells must wait for antitrust regulators to approve the deal, the earliest it could start shifting personal accounts and loans away from First Interstate would be June. The bank would send notices to account holders notifying them of the change.

* Fees: Analysts don’t expect increases in the near term.

* Competition: Look for a deluge of advertising from competing banks that believe they offer more personalized service and will try to lure Wells/First Interstate customers by offering them incentives to switch institutions.

* Credit card rates: Smaller banks may lower their rates to make their services more marketable to Wells/First Interstate customers.

EMPLOYEES

Wells plans to cut up to 8,000 of the two banks’ combined California jobs. Layoffs will commence if the deal is approved by regulators and shareholders, which is expected to happen early in the second quarter of this year. Staff reductions have already begun through attrition, however, as both banks imposed hiring freezes during the takeover battle. Wells will offer severance packages that are relatively generous--even for part-time workers--generally speaking, four weeks of pay per year of service (prorated for part-timers).

SHAREHOLDERS

If the deal closes, First Interstate shareholders will become Wells Fargo shareholders, receiving two-thirds of a share of Wells for each of their shares. Wall Street thinks it’s a good deal: Both companies’ share prices have risen as the agreement neared.

EXECUTIVES

The 39-member First Interstate senior management team would receive handsome severance packages totaling about $29 million. First Interstate Chairman William E.B. Siart would receive about $4.57 million of that.

CALIFORNIA’S BANKING EVOLUTION

The number of banks in California has been declining for the last 10 years, although the number of branches has remained relatively stable. The Wells/First Interstate merger would close as many as 350 branches and put Wells in the No. 2 spot for state banking market share.

Banking companies:

1995: 358

Branches, in thousands:

1995: 4.23

Market share:

Bank of America: 41.7%

Wells Fargo/First Interstate: 22.1%

Union Bank/Bank of California: 6.2%

Sumitomo: 1.6%

Other: 28.4%

Note: Market share figures and bank and branch numbers are based on deposits as of June 1995.

Sources: California Bankers Assn.; California Banking Department