BANK OF THE FUTURE; COFFEE JOINS CHECKING AS SERVICES EXPAND.

Byline: Dave McNary Daily News Staff Writer

The banking supermarket is coming, and not over by the bakery section of your grocery store, either.

Banks are scrambling to broaden the range of products they offer, led by such fast-moving players as Minneapolis-based Norwest Corp., which agreed Monday to merge with San Francisco-based Wells Fargo & Co. in a $31.9 billion deal.

Though the new bank will keep the Wells Fargo moniker, its top executive will be Norwest's Richard Kovacevich, an executive with extensive retail background.

With the merger frenzy expected to continue, your branch - if it stays open - could soon be selling everything from insurance to mutual funds. Chances are good that there will be a coffee bar in the lobby - run by Starbucks or maybe Coffee Bean & Tea Leaf - and perhaps a dry cleaner and copy center operating out of the old vault.

``I think the Wal-Mart model is probably where banking is going,'' said Ken McEldowney, executive director of Consumer Action, a San Francisco-based watchdog organization. ``I believe we'll see more banks trying to give customers access to services they wouldn't normally have access to.''

In short, the successful bankers will be the ones who shed their pin stripes for polo shirts and khakis.

``People aren't putting up with bad service from banks anymore because people pay a lot more attention to their finances than they used to,'' said retail consultant Frederick Marx. ``It doesn't work for a banker to be laid-back and work banker's hours. You're seeing them becoming much more aggressive.''

What banks are starting to do is add time-saving bells and whistles, according to Kathleen McClave, president of bank consultants Edward Furash & Co. ``They have borrowed a page from retail by making banks into destinations so you can get a lot done in one place,'' she said.

If that means remaking how a bank should look, so be it. ``People running banks aren't real sentimental and most branches now have more space than they need, so why not put a Starbucks in the lobby?'' Marx asked rhetorically.

Since banks tend to be located at prime retail locations - ``They're at the corner of Busy and Busy,'' Marx said - it's not far-fetched to imagine a bank branch with a real estate office, Internet service provider and travel agency.

Norwest comes to the merger table as one of the nation's best performers during the past decade, thanks in large part to a strategy of offering customers a far wider range of products than rivals while expanding rather than closing sites. It has 930 branches, many in rural towns and most offering home loans and investment products in addition to the usual checking and savings services.

``Norwest is a big bank that feels small to customers,'' McClave said.

It is the nation's top originator and servicer of home mortgages, and analysts estimate that traditional banking produces less than 40 percent of its profits.

McDavid Stilwell, an analyst with SNL Securities, cautions that the new Wells-Norwest is not a guaranteed success. ``Nobody cross-markets better than Norwest, but I think people should continue to be skeptical about it,'' he said. ``People want to shop around because pricing is what guides consumers.''

The new bank will have $191 billion in assets with 20 million customers and outlets in all 50 states. The deal, expected because of Wells' poor performance, follows megamergers between BankAmerica and NationsBank, and Citicorp and Travelers Group.

More such deals will come among banks and financial service providers, according to Thomas Theurkauf of Keefe Bruyette Woods. ``We're in the midst of consolidation with thousands of banking companies that still dot the landscape,'' Theurkauf said.

For its part, Wells also has been aggressive by closing traditional branches, opening supermarket outlets, leaving the mortgage business and experimenting with leasing excess space to retailers like Starbucks. But it also became a takeover target as its once-sterling reputation sagged following angry customer reaction to its poorly executed $11 billion takeover of First Interstate Bank.

``Wells has lost a lot a credibility,'' Theurkauf said.

Tania Azarchs, an analyst with Standard & Poor's rating service, said the best outcome will be for the new bank to blend the best of both. ``Merging is going to be tougher than it appears,'' she said. ``You have to have a well-honed sales staff and the data systems to target customers effectively.''

That means generating a warmer, fuzzier feeling than rivals. For example, the clout of the combined banks could enable it to offer a far wider variety of investment options for those whose certificates of deposits have reached term. Or it could help customers pay down high-rate credit cards with a consolidation loan or a lower-rate card.

``What's difficult about a merger like this is making local customers feel as if they're still valued to huge organizations,'' McClave said.

Who's Next?

With Monday's announced merger of Wells Fargo & Co. and Norwest Corp., the number of remaining candidates for a bank merger or takeover has dropped.

FINANCIAL INSTITUTION HQ 1997 REVENUES

Golden State Bancorp San Francisco  $1.14 billion

COMMENT: The Calfed-Glenfed parent corporation has acknowledged it is a likely takeover target.

Union Bank San Francisco $2.5 billion

COMMENT: Bank's Japanese parent would get premium for the strong franchise.

Sanwa Bank Los Angeles  n/a

COMMENT: Though officially not for sale, the 107-branch California division of Japan's fifth-largest bank could draw suitors.

Golden West Oakland $2.91 billion

COMMENT: Parent of World Savings concentrates on mortgages, downgrading chances of a deal.

City National Beverly Hills  $411 million

COMMENT: The business bank, which also caters to high-net-worth individuals, could become a specialty arm of a larger player.

Imperial Bancorp Los Angeles $333 million

COMMENT: This corporate specialist might be too narrowly focused to draw takeover attempts.

SOURCE: Daily News research; Bloomberg News; SNL Securities.

CAPTION(S):

drawing, box

Drawing: Bank of the Future

Jon Gerung/Daily News

Box: Who's next? (see text)