Bank mergers ripple in accounting world; shrinking bank business hits downsizing accountants.

Mergers and downsizings, which already have an estimated 12,000 laid-off bankers on the beach in the Los Angeles area and perhaps 12,000 to 20,000 more in the offing, have been causing similar woes among accountants. The accounting firms have been merging and downsizing in their own right, and the banking consolidation is compounding their problems.

"There's an awful lot of accountants on the street with the downsizings of public accounting firms here," declared Samuel Bell, L.A. managing partner of Ernst & Young, a Big Six accounting firm.

Clarence T. Schmitz, L.A. managing partner of KPMG Peat Marwick, said he was the architect of his Big Six firm's restructuring here that lopped its local head count "by 12 to 15 percent through the spring to 1,000 to 1,100." Unhappily but correctly anticipating tougher times, Schmitz said, he made the hard decisions upon replacing Maurice DeWald as Peat's L.A. chief.

As a result, Schmitz assured, he foresees no more layoffs occurring in his office despite the planned acquisition of L.A.-based Security Pacific Corp. by San Francisco-based BankAmerica Corp. It generally is expected Peat will lose the Security Pacific account, which generated $7.6 million in annual fees for the accounting firm, when the L.A. banking giant disappears into BankAmerica, anticipated early next year. Ernst & Young, of course, long has been BankAmerica's independent accounting firm. Bell said, and he assumes and hopes that will continue if the acquisition of Security is effected.

While that conceivably could generate additional work for Ernst & Young's L.A. office to help out its sister office in San Francisco, Peat's Schmitz predicted any such additional needs would be "very minimal."

Although allowing he has been receiving reams of resumes because of the depressed accounting profession, Bell said he was unaware whether any Peat Marwick personnel on the Security Pacific account have been seeking work with him. Another Ernst & Young partner here suggested the L.A. office is cautious about adding any staff now because of the possibility of another banking combination:

While Ernst & Young is expected to be the winner and Peat Marwick the loser in the planned BankAmerica/Security Pacific combination, the opposite could occur if L.A.-based First Interstate Bancorp is acquired, as frequently rumored. The L.A. office of Ernst & Young long has had the FIB account, he said, while Peat Marwick's San Francisco office has had the account of Wells Fargo & Co., the most frequently mentioned candidate to acquire FIB.

Actually, lamented Peat's Schmitz, everybody in the profession loses in mergers like these.

Consolidating bank operations typically cuts outside accounting fees by as much as 40 percent, trade sources estimated. Other big consolidations on the griddle:

* National City Bank's overtures to Ameritrust. Based in Cleveland, both are clients of Ernst & Young, which is likely to realize a significant shrinkage in total billings if the two accounts become one, trade sources said.

* Chemical Banking, an account of Price Waterhouse, likely will be the survivor in the merger with Manufacturers Hanover, a Peat Marwick account.

* NCNB, also a Price Waterhouse account, likely will be the survivor in an acquisition of C&S/Sovran, another Ernst & Young account.

Those are only the more obvious ones among a landslide of banking and other financial institution consolidations expected to pummel the accounting profession further. Among the 6,000 commercial banks in the nation, according to a survey by Grant Thornton, a national accounting firm, executives at one out of six expect their institutions will be acquired in the next two years.

The survey obviously indicates there will be fewer financial institution clients for public accounting firms, remarked Richard Stewart, Grant Thornton's L.A. managing partner. After all, he said, the number of banks per capita in the United States is much higher than anywhere else in the industrial world.

Besides the survey regarding more bank acquisitions, Stewart added, federal regulators will continue to close down troubled financial institutions, further eroding the client bases of accounting firms. All this means, he concluded, public accounting firms must reallocate their resources -- by retraining personnel for new and different types of services or else face further downsizing.