A New Deal for First Interstate : Strengths and Weaknesses

First Interstate Bancorp of Los Angeles has agreed to be purchased by Minneapolis-based First Bank System Inc. in a $10.1-billion stock-swap deal. What the banks have going for them and what they don’t:

FIRST INTERSTATE

Strengths:

* Geographic diversity. Has 1,148 offices in 13 western states, providing it with a strong supply of deposits.

* Overcame loan problems of the early 1990s by improving its credit process and changing to a more retail and consumer focus.

* Improved earnings in 1995 through robust loan growth and improved net interest margins.

* Well-known name that would be adopted by acquiring bank.

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Weaknesses:

* Big staff. Despite recent layoffs and restructuring, remains heavily staffed at 27,901 employees.

* Faces risks through loans to consumers and still-struggling industries in Southern California.

FIRST BANK SYSTEM

Strengths:

* Strong profits. Last year posted net income of $420 million. Has experience in integrating companies--it has made 23 purchases in the past five years.

* Among the most efficiently run banks in the nation, with low operating costs.

* Large credit card operation. Also operates a fast-growing and lucrative division that runs credit card operations for larger retailers.

Weaknesses:

* With 366 offices in 11 states in the Midwest, lacks a large branch system and needs to boost the size of its consumer bank deposits.

* A common name. First Bank has often had to adopt different names in new markets--such as Colorado National Bank--to avoid lawsuits from existing competitors with similar names. The merged bank would be called First Interstate.