A financial mecca without a major lender to bank on.

Los Angeles is losing face as well as jobs and financial clout as its hometown banks dwindle to a precious few.

The venerable name of Security Pacific Corp. is about to disappear from the skyline as that institution merges with San Francisco's Bank of America. And analysts predict First Interstate Bancorp is the next Los Angeles institution to become a ghost of its current self -- possibly as an arm of Wells Fargo Co., also of San Francisco.

And disappearing along with the banks is the reputation of Los Angeles as the financial center of the West.

"If we lose First Interstate, we have no Fortune 500 (banking) institutions left in Los Angeles County," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. "If you are the financial center of the West, why aren't you the headquarters of a big bank? The irony is that the greatest (financial) activity is down here."

With agriculture withered, manufacturing dwindling and the defense industry beating a retreat, key financial pillars of Los Angeles County's core are vanishing -- challenging government officials and business leaders to find new foundations on which to build the future.

The disappearance of major banks from Los Angeles complicates the challenge.

"Weak banks are a real negative for a community," said Jerry Jordan, chief economist for First Interstate Bancorp. "Banks can be real leaders. In both St. Louis and Pittsburgh, the renaissance in both cities depended on the role large banks played in the community. I've seen other situations where banks are too weak to provide a leadership roll, and it really hurts."

Deadening the pain somewhat, bank experts say, will be the large operations left behind as the bank headquarters depart. Even if the cachet of bank heft is gone, most of their day-to-day operations will remain, though perhaps in smaller numbers.

"I would expect to see a 60 percent to 70 percent decline in the number of bank offices and banks," said William Mortensen, chief executive of Santa Monica-based First Federal Bank of California, a healthy and expanding S&L.

Many observers do not view the consolidation as a negative.

A recent report authored by Arthur Andersen & Co. and the Bank Administration Institute quoted bank officials saying the industry suffered from diminished profit margins caused by too many banks and S&Ls, according to Joel Friedman, an Andersen Consulting banking expert.

Banks' problems are also exogenous. "More people are using home banking to do just about everything," said Campbell Chaney, a stock analyst with San Francisco-based brokerage Sutro & Co. "The real reason for bank branches over the years has become to get consumer loans or car loans, so the need for branches has been diminished."

Local overcapacity is perhaps most severe among S&Ls. Several of the largest S&Ls based in Los Angeles may eventually disappear, though some of the largest healthy institutions, like Beverly Hills-based Great Western Bank and Irwindale-based Home Savings of America, are expected to become household words nationwide as they continue their expansion.

S&L cuts are expected to hit especially hard in Los Angeles, which is home to five of the largest 12 thrifts in the country. Thrifts like Los Angeles-based California Federal Bank, Glendale-based Glendale Federal Bank and Los Angeles-based Coast Federal Bank, have marginal capital and are expected to merge out of existence if they are unable to ride out current loan problems and eventually find more capital.

If two local institutions like California Federal and Glendale Federal merge, that could lead to a whole new round of layoffs in an industry already shedding employees.

Kyser predicts a rapid decline in employment in the financial sector. Employment at depository institutions rose from 98,200 in 1988 to a peak of 101,800 in 1990, according to Economic Development Corp. statistics. But it is expected to plummet to 91,800 by 1992, Kyser noted.

Said Friedman: "The thrifts will take a very, very big hit."

Unless new profit centers for banks and S&Ls are found, institutions in the future will simply not need so many employees, no matter how competent they are at their jobs, experts say.

Where those employees, many in highly specialized jobs that offer few transferable skills, will end up is an open question, especially given that other financial service companies, like insurers and securities firms, are also subject to shrinking employment rolls.

Another human loss, First Federal Bank's Mortensen said, will be public service activities that banks and S&Ls perform for the community.

"Banks and S&Ls make disproportionate contributions of time and money for good works in the city," he said. "As less time and money is given, I think we will come to miss that and appreciate what was done."

Some in the community say that Los Angeles charities will be hit particularly hard by the merger because of the disappearance of headquarters of large banks. "Where a corporation is headquartered has a bearing on the community cultural support forthcoming," Jordan said.

Customer service is one area that will not be hurt by the mergers, bank experts said. "As for the bank (and S&L) customer impact of the merger, there should be none," Friedman said. "If you look at all the (major) banks, they are highly focused on the Los Angeles marketplace."

Friedman said future bank customers will be able to choose from a handful of high volume, low cost, basic service providers like Bank of America, and from a variety of small banking niche players who will provide them a higher level of service or a specialized expertise in a type of lending for an additional cost.

Similar trends are expected in the S&L industry, which is increasingly being folded into the banking industry.

Examples are institutions like the giant $37 billion (assets) Great Western, expected to continue expansion nationwide into profitable markets, and S&Ls like First Public Savings Bank of Chinatown, a $201.9 million (assets) bank which caters to the Chinese and Chinese-American community.

Mortensen, however, was not optimistic that the cost savings of consolidation would be passed on to customers. Less competition for deposits and lending business could lead to higher costs to consumers in terms of higher interest rates on loans, fees and charges, he said.

The core question banks and S&Ls still must answer is what their future role will be in an increasingly competitive financial services arena.

Banks and S&Ls have been taking it on the chops for years from competitors who are less regulated and more innovative.

Very large businesses now often lend to each other rather than go to banks. Finance companies owned by manufacturers provide a large chunk of the credit to consumers to purchase goods. And on the deposit side, mutual funds and other investments have provided depositors with great incentive to abandon the banks.

Much of the banks' future viability will depend on current congressional hearings on whether to give them expanded powers, such as the ability to underwrite and sell securities and insurance.

Some see bank's increasingly shifting away from lending and toward use of their branches as distribution networks for financial products.

"I see growth as a distributor as banks take advantage of the convenience of their branches -- that's what banks offer," Crowley said.

Others noted that banking activity tends to run in cycles and that a return to the go-go style of the 1980s could mean a return to speculative areas that banks have foregone for several years, such as financing acquisitions and speculative real estate investments.

"Banking seems to go in cycles with the economy," said Jeffrey Turner, a banking attorney at the Los Angeles office of Brobeck, Phleger & Harrison. "Right now they are out of finance and acquisitions. I tend to think if the economy recovers, banks will be in the business of doing that."

Others question whether large expanding S&Ls like Great Western or Home Savings will eventually move back into commercial lending.

"Great Western and Home may move in the bank direction," said Donald Crowley, a banking analyst with securities firm Keefe, Bruyette & Woods of New York.

Crowley said that the thrifts may be forced into the commercial arena because increasing competition for relatively safe home loans may make profit margins in that sector paper thin.

But that worries one analyst. "I hope S&Ls won't get back into commercial loans," said Chaney. "They have proven they are not very adept in making commercial loans."

One bright spot for the future of banking in Los Angeles is expected to be the burgeoning local Asian-American community and its demand for banking services.

Asian- and Asian-American-owned banks and S&Ls have proliferated in the past decade and are expected to continue growing. The specific ethnic groups doing the expanding, however, are expected to change.

Japanese banks, the most aggressive in expanding locally in the 1980s, are expected to be supplanted by other nations, such as Taiwan, Hong Kong and Korea.

"We will have a tremendous impact from the Pacific Rim," said Wade Francis, chief executive of Long Beach-based consulting group Unicon Financial Services Inc. "There will be a greater influx of money. They want to put money in a safe haven and Los Angeles is the No. 1 destination right now."

In addition, Canada, Mexico and Europe, which all have strong, centralized banks, are expected to put Los Angeles high on their list of potential branch locations.

Most analysts also expect most of the emerging national superbanks to open up shop in the state. The nation's largest bank, Citibank of New York, owns and operates an Oakland S&L, called Citibank Federal Savings Bank, with 27 branches and six mortgage offices in Los Angeles County.

The bank also owns a commercial bank in Sunnyvale, giving it a state banking charter and the ability to offer commercial banking services.

For many banks, Los Angeles is still the doorway to California's richest potential clientele, said Chaney.

"The lion's share of activity is still here." said Chaney.