Rival Banks Vie for Clients in Wake of Merger

Now that Wells Fargo & Co. has won First Interstate Bancorp, another contest is starting: the fight to win away both banks’ customers.

Rival banks and thrifts said Wednesday that they hope many First Interstate and Wells Fargo customers become disgruntled and search for another institution. Past big-bank mergers have spawned a chorus of consumer gripes over branch closings, less personalized service, longer lines and higher fees. Minority communities complain that mergers deprive their neighborhoods of sufficient banking services.

Wells Fargo’s plan to close hundreds of branches “will be really hard for people like me,” said Kerry Babbitt as she banked Wednesday at First Interstate’s branch in Anaheim Hills. “I use First Interstate ATMs and branches all over the place because they’re so convenient. If they close a bunch of them and I have to start driving all over to find a place, that just steals time away from me.”

Acquisitive banks such as Wells Fargo “don’t care about us. The only thing they care about is how to take our money,” said First Interstate customer Leandro Gatus as he visited the bank’s Wilshire Oxford branch in Los Angeles. He said he was thinking of switching his account to Bank of America.

It’s those kinds of complaints that have Wells Fargo’s competitors already rushing to woo customers. Glendale Federal Bank, for instance, has waged such an advertising campaign since Wells Fargo launched its bid for First Interstate in October. Sanwa Bank California issued a statement Wednesday painting Wells Fargo as becoming too big and impersonal. The merger, Sanwa asserted, “will be positive for us.”

Wells Fargo insisted that it will fight for every First Interstate customer by keeping disruptions to a minimum, even though it plans to close most of First Interstate’s 430 branches in California and to eliminate 7,000 to 8,000 jobs.

San Francisco-based Wells Fargo said it will actually enhance customer service in large part by increasing, not decreasing, its number of retail outlets mainly by placing more mini-branches inside supermarkets even as its stand-alone branches are closed. Some other banks also have opened branches inside stores, but Wells Fargo is considered an industry leader in using technology to make banking more convenient to customers--and cheaper for the bank to operate than traditional offices.

In the last two years, Wells Fargo installed more than 350 such outlets in Ralphs, Vons, Safeway and other supermarket chains--with a heavy concentration in Los Angeles and Orange counties--even as it was closing many traditional full-size offices.

“Among the banks that are aggressively expanding their business beyond the traditional arena, they are at the top of the list,” said Dan Raftery, vice president of Willard Bishop Consulting, a supermarket consultant in suburban Chicago.

But some community groups already have taken issue with that strategy. At a hearing Monday in Los Angeles, they complained that inner-city neighborhoods lack the supermarkets that Wells Fargo could utilize for branches, and that its closure of full-size branches is taking valuable jobs from those regions.

Also, no one doubts that Wells Fargo--whose management is often praised for its efficiency--will still run into problems as it combines the paperwork of First Interstate’s $50 billion in deposits and $37 billion in loans with its own.

“As good as the Wells people are, there are still going to be some glitches and delays,” said Bert Ely, president of a bank-consulting firm bearing his name in Alexandria, Va. “The Wells people know that, and they’ll try to keep it to a minimum.”

Another challenge for Wells Fargo is keeping its business customers happy. Small- and medium-size firms that use Wells Fargo and First Interstate for loans and other financing are worried that they won’t be well served at grocery-store branches.

“Supermarkets are just not accessible to businesses,” Kamran Nazarian, a 25-year-old jeweler, said at First Interstate’s headquarters branch in downtown Los Angeles. “It seems that after the merger, personal service will go out the window.”

But some First Interstate customers said they had no plans to switch. Kevin Johnson, who Wednesday was at the bank’s Florence branch in Los Angeles, said he does most of his banking electronically and, “to be honest, as long as they have an ATM,” he’ll stay put.

Industry experts generally agree that big bank mergers trigger a number of the target bank’s customers to become frustrated with merger-related snags and to move their accounts.

Wells Fargo itself conceded that it lost a considerable number of customers after its 1990 purchase of the California branches of defunct thrift Great American Bank. Wells Fargo also lost accounts after it acquired Crocker National Bank in 1986, as did BankAmerica Corp. after it bought Security Pacific Corp. in 1992.

But there is debate as to how many customers typically flee after a merger.

Analysts say that 5% to 10% of a bank’s customers usually are vulnerable to being snared by competitors, but that it depends on how well the acquiring bank merges customers’ accounts, how customers react to branch closings and--particularly in the case of business clients--whether their loan officers are laid off or transferred.

“Our experience has been that in situations like this, there are certain customers who for one reason or another look for alternatives,” said Howard Gould, Sanwa Bank’s chief administrative officer. “A merger takes away choices.”

Times staff writers Thomas S. Mulligan and Paul H. Johnson in Los Angeles and John O’Dell in Orange County contributed to this report.

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