BIG DEAL: WELLS, NORWEST ANNOUNCE MERGER.

Byline: Deborah Adamson Daily News Staff Writer

Wells Fargo & Co. admitted it made mistakes in its integration of First Interstate Bank, but assured consumers Monday that the same thing won't happen during its merger with Norwest Corp.

In fact, officials with both companies emphasized during Monday's announcement of their $31.9 billion merger that this is a marriage of complementary companies, not the shotgun-wedding of competing companies that bogged down the Wells Fargo-First Interstate merger.

Wells Fargo of San Francisco and Norwest Corp. of Minneapolis will merge in a stock-for-stock deal to form the nation's seventh-largest bank in terms of asset size and the third-biggest in California based on market share.

Each Wells Fargo common share will be exchanged for 10 Norwest common shares. Wells Fargo shareholders will end up owning 52.5 percent of the new company.

The new company, to be called Wells Fargo & Co. and based in San Francisco, will have $191 billion in assets, more than 90,000 employees, 20 million customers and 5,777 financial services offices worldwide, which include bank branches in 21 states. Company officials said layoffs will be minimal.

The marriage gives Norwest a big distribution network in California while giving Wells Fargo a nationwide presence.

While the merger will give Wells Fargo a mortgage lending and servicing arm, customers won't notice much change since Wells Fargo already refers people to lenders it works with, including Norwest, said Glen Grabelsky, a bank analyst at Standard & Poor's in New York.

Since few Norwest and Wells Fargo operations overlap, there shouldn't be the kind of systems problems in this merger that occurred during the First Interstate takeover, Grabelsky said.

Norwest does not have any bank branches in California, but it does have mortgage lending offices that are expected to remain open. Wells Fargo does not offer mortgage loans or services directly.

``Integration issues with Wells, we believe, are largely behind the company,'' Grabelsky said.

Wells Fargo's troubles in absorbing First Interstate since the 1996 merger have cut into its earnings. For instance, a charge related to incorrect posting of customer deposits led to a second-quarter 1997 operating loss of $180 million.

``We tried to integrate the company too fast,'' said Wells Fargo Chairman and CEO Paul Hazen, who will be chairman of the combined bank. ``We did the entire systems integration in four months and that was too fast.''

This time, ``we're taking three years to complete this merger. We're very conservative, very measured, very focused on ensuring it happens smoothly, without interruption in customer service,'' said Richard Kovacevich, chairman and chief executive of Norwest, who will become president and CEO of the new bank.

Norwest's stock dropped 2-7/8 to close at 36 13/16 on Monday's news while Wells Fargo's jumped by 2-1/2 to 365-3/4. Kovacevich said that once investors realize the true value of the deal, share prices should rebound.

``Until people can understand this story and how exciting this is, and the value that will be created as a result of this, (the decline) doesn't surprise me at all,'' he said. ``This is an awesome, awesome franchise.''

Bigger, Better Bank?

Monday's announced merger of Wells Fargo & Co. and Norwest Corp. will create the nation's seventh-largest bank, and the largest independent home mortgage lender. The combined institution will retain the storied Wells Fargo name. In California the new entity will be the third-largest bank with 13.74 percent of the retail banking market.

Combined assets: $191 billion

Deposits: $130 billion

Customers: 20 million

Employees: 90,000

Branches/outlets: 5,777

Revenues (1997): $19.3 billion

Ownership: 52.5 percent Wells Fargo stockholders; 47.5 percent Norwest stockholders

Source: Associated Press; Hoover's Inc.; SNL Securities

CAPTION(S):

Photo, Box

PHOTO (Color) Wells Fargo Chairman and CEO Paul Hazen, left, and Norwest Chairman and CEO Richard Kovacevich peruse the paper.

Associated Press

BOX: BIGGER, BETTER BANK? (See text)