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 GREENVILLE, N.C., Oct. 5 /PRNewswire/ -- Banking will become a declining industry -- despite record profits in 1992 -- unless banks make significant changes going forward, the chairman of First Union National Bank of North Carolina said yesterday.
 "Today's improving economy and high margin environment have given most banks a breather, but it would be a mistake to think that today's record bank earnings mean we're suddenly a growth industry," said Frank H. Dunn Jr., chairman and chief executive officer of First Union National Bank of North Carolina, speaking at the 1993 Banking Forum at East Carolina University. "The core business piece of our industry may very well decline, even though it may not be as evident yet in North Carolina, and some bankers don't want to admit it."
 Dunn, a 30-year banking veteran, cited factors such as non-bank competition and changing demographics that are hurting the banking industry.
 "Post-war baby boomers have aged, moving from their high borrowing years to their high saving years, turning the banking industry on its ear," he said. "Mutual funds e? grown 10 times faster than bank deposits in the last 10 years, and by the year 2,000, American households are expected to put only $1 out of $5 in a bank.
 "Banks are also getting beat up on the loan side, squeezed by Wall Street firms and others that securitize loans to sell as a group to investors -- accounting for 80 percent of the mortgages sold today. And non-banks continue to chip away at our credit card outstandings."
 At the root of the banking industry's problems is excess capacity, or too many banks chasing too little business, Dunn said.
 "Even with all the mergers of the last several years, there are still more banks in First Union's seven-state banking region than in Canada, Japan, Germany, France and Great Britain combined," Dunn said.
 "Even in the good times of the 1980s, there wasn't enough good business for 12,000 banks in this country to prosper. That's why, of our country's top 50 bank holding companies in 1986, fully one-half have either disappeared or shrunk their balance sheets since 1986."
 Despite these pressures from all sides, Dunn said that strong banks will prosper if they change. He quoted John Wooden, legendary UCLA basketball coach, who used to say, "Failure is never fatal, but failure to change may be." He outlined ways that First Union -- and other banks -- can meet these challenges head on. First Union has:
 -- Created 10 mutual funds, the First Union Funds, and is licensing
 2,600 branch employees (two in every branch) to sell mutual
 -- Become more aggressive in offering corporate products, such as
 derivatives, investment banking and syndication services;
 -- Shrunk its costs, resulting in virtually flat expense growth in
 the last four years;
 -- Re-emphasized the importance of listening to customers;
 -- Rededicated itself to valuing employees so they, in turn, can
 take care of customers;
 -- Committed itself to "re-engineering," or constantly looking for
 creative new ways of delivering produca?nd services;
 -- Developed a stronger sales culture among employees, with stronger
 sales leadership and sales training.
 "One of the reasons we wanted to be a $72 billion bank was so we'd have the muscles -- and the brains -- to offer the most sophisticated products and services to our customers," Dunn said. "And we do -- and we will. But there was another reason we wanted to be big. Big can be beautiful if you listen to your customers -- if you can hold onto customers of banks you acquire -- and if you shrink your costs. In our case, we've typically held onto 95 percent of our acquired customers -- but only held onto 60 percent of acquired costs."
 Dunn concluded by saying the key to success will be in becoming a strong sales organization. "We're going to build a world-class sales organization at my company, and others in our industry will also," he said. "We must be demanding, focused, and relentless in our commitment to great day-to-day execution. But we're going to be just as relentless about treating employees and customers the way we would like to be treated."
 First Union National Bank of North Carolina is a principal subsidiary of Charlotte-based First Union Corporation (NYSE: FTU FTUpr) and operates 250 offices throughout the state.
 -0- 10/5/93
 /CONTACT: (Media) Sandy Deem of First Union, 704-374-2710/

CO: First Union National Bank of North Carolina; First Union
 Corporation ST: North Carolina IN: FIN SU:

MM -- CH005 -- 8764 10/05/93 10:03 EDT
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Publication:PR Newswire
Date:Oct 5, 1993

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