Ambushing Wells Fargo

A pioneer bank and stagecoach company, Wells Fargo helped to open the West, as its storied drivers fought off desperadoes to bring back the gold from California's rich mines. Now the nation's 13th biggest bank, Wells Fargo has been less successful in conquering the new West. Last week Government trustbusters stopped the company from completing one of the biggest mergers in U.S. bank history--a deal that Wells Fargo's chiefs had hoped would expand their reach throughout California.

The intended partner was First Western Bank & Trust Co., which has assets of $1.1 billion v. Wells Fargo's $7.8 billion. Very important. First Western has 54 branches, mostly in the Los Angeles area, which would give San Francisco-based Wells Fargo a firm hold in the southern part of the state. California permits banks to branch out statewide; this liberal law has allowed the huge Bank of America to open 977 branches and do 40% of the state's banking. Wells Fargo President Richard P. Cooley, 48, a tall, angular World War II pilot who is rated one of the nation's best bankers, has long yearned to compete more strongly with the B. of A. Says he: "Corporations want to operate statewide in California, and we have to be in the south in a big way to take care of them. If we're not, we lose them."

Costly Growth. In 1967, Wells Fargo started a five-year program to open 50 branches in Southern California. But California's economy has been slowed by the recession in aerospace, and it now takes three years instead of the expected 18 months for a new branch to become profitable. Thus Cooley will build only a few more outlets after the expansion program is completed later this year. Instead, he will concentrate on trying to get higher profits out of the bank's 285 branches.

With start-up expenses so high, Wells Fargo was understandably eager to acquire First Western's existing system. Cooley was willing to pay $95 million, almost $22 million more than First Western's book value. Though the U.S. Comptroller of the Currency approved the deal, the Justice Department has taken a much sterner view, claiming the merger would reduce competition in both lending and customer service. Last week Justice filed suit against the Wells Fargo merger, and most observers figured that Cooley would drop the deal rather than fight a long, costly battle in court.

The biggest loser will be First Western, a bank that was originally spun off from A.P. Giannini's Transamerica Corp., and has been owned at various times by two Texas tycoons, Troy Post and James Ling. Its current owner is World Airways, which has made millions in the past decade, largely by hauling troops and equipment to Viet Nam.

World President Edward J. Daly is in a bind. According to a rule passed by Congress last year, nonbanking companies can no longer own banks. And since Daly does not want to sell World Airways, he must sell First Western. But to whom? The Justice Department decision implies that any U.S. bank large enough to afford the price cannot buy First Western.

But Government officials, under political pressure from foreign countries to redress the recent expansion of U.S. banks abroad, would welcome serious bids from non-U.S. banks.

This file is automatically generated by a robot program, so reader's discretion is required.