
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, June 24, 1995                   TAG: 9506260047
SECTION: EDITORIAL                    PAGE: A-11   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

FIRST UNION'S MEGADEAL

THIS WEEK'S announcement that First Union Corp. is buying First Fidelity Bancorp., consummating the biggest banking merger in American history, should not have come as a surprise. To be sure, the price - $5.4 billion - raised eyebrows. Some banking analysts say First Union overpaid. But they also are predicting more such megadeals - and premium prices - as giant institutions maneuver to grow bigger still. We need to get used to this. With laws that hinder interstate banking falling by the wayside, the pace of consolidation is naturally picking up.

First Union, moreover, already had established itself as an aggressive acquirer, constantly on the lookout to add banks in an eat-or-be-eaten era. Roanoke Valley residents have discerned this since 1993, witnessing not only First Union's purchase of Dominion Bankshares Corp., but also the expansion into new markets directed from First Union's mid-Atlantic regional headquarters - located, pleasantly enough, in Roanoke.

This valley is of course on the sidelines of the blockbuster First Fidelity deal. But the likely repercussions here offer another reminder of the gift, mostly underappreciated, that former Dominion chairman Warner Dalhouse Jr. bequeathed to this region when he negotiated First Union's acquisition of his bank.

The valley suffered with the loss of Dominion, no question. But the bank would have been taken over by someone in any event. Nothing in this business is guaranteed. Yet, today, with several of First Union's systemwide functions now based in the Roanoke Valley, the opportunity to sell financial services to an expanding customer base looks like good news for local employment prospects.

The all-stock marriage announced Monday will create a potent East Coast banking system - the nation's largest contiguous network of branches, stretching from Florida to Connecticut. Speculation about moves into the rest of New England already has been heard.

All this merger activity - First Fidelity itself has bought more than 20 banks since 1990 - is generating a lot of disruption in the banking business, with more to come. As former Dominion employees have discovered, an acquisition can change the business culture as well as create job dislocation and uncertainty.

Efficiencies, though, are a principal driving force (along with technology) of the consolidation trend. At former First Fidelity branches, First Union will offer consumer and commercial products that it has developed. The Charlotte-based bank also will, as it has done before, combine processing work and cut redundant corporate staff.

While that means some job losses, this sort of transition seems inescapable. In the past, anti-competitive regulation sustained excessive employment. That's no longer an option in markets increasingly open to global competition and witnessing a breakdown of walls that traditionally divided banking from other kinds of financial services.

The consolidation trend, meanwhile, should generate opportunities for smart, community-based bankers striving to fill local-service niches, such as the founders of the new Valley Bank.

by CNB