FIRST INTERSTATE SEEKS ACQUISITION
Less than two months after First
Interstate Bancorp withdrew its bold attempt to buy BankAmerica
Corp, Chairman Joseph Pinola is still looking for a good buy,
but he is also looking at ways to avoid being bought.
    In a wide-ranging interview, Pinola said he's looking for
ways to improve profitability and capital between now and 1991,
"so as to resist any potential look at us...to maintain our
independence, if possible."
    In 1991 federal regulatory changes will allow the major
East Coast banks to buy banks in California.
    First Interstate, the fourth largest California bank, and
the nineth largest nationwide, owns 24 banks in 12 western
states and has franchise operations in four additional states.
    Bank industry sources say it is an attractive target for
large U.S. or foreign banks, looking to quickly move into the 
lucrative California market and the West Coast region.
    While declining specifics on his corporate strategy, when
asked if acquisitions will be part of the plan, Pinola replied,
"That's undoubtedly a fair statement...it would be almost naive
not to think that."
    Pinola characterized his acquisition strategy as
"opportunistic".
    He said he will look for banks in management trouble that
he can get at a bargain, then add management to restore
profitability, or for banks in states where First Interstate
already operates, then cut costs by combining resources.
    The exception, he said, would be Texas, where he said most
of the banks are already well managed, but might be purchased
at a discount because of the depressed regional economy.
    Pinola declined comment on what circumstances might move
him to rekindle his bid for BankAmerica, saying only, "We
continue to monitor and look at a lot of things and a lot of
people continue to monitor and look at us."
    Banking analysts, however, consider another First
Interstate bid at BankAmerica a long shot, not likely to happen
any time soon.
    Pinola called his decision last month to withdraw his 3.25
billion dlr bid at the nation's second largest bank, "a very,
very difficult decision."
    With that decision made, however, he acknowledged First
Interstate may now have a difficult time keeping its number
four position in the California banking community.
    "The competition in this state is tough," he said, noting
CityBank's recent purchase of 50 financial service branches
from Sears Roebuck company. "CityBank is moving rapidly to move
us down to fifth and Wells Fargo down to fourth," he said.
    Outside California, Pinola acknowledged that Security
Pacific Corp, with its recent acquisitions in Arizona,
Washington and Oregon, is quickly becoming a regional
competitor in areas where First Interstate has long dominated.
    "Security is, has been and continues to be a highly
profitable and obviously well managed company," he said.
    He added, however, First Interstate, at the moment, has the
advantages of having owned and managed regional banks longer
and has the recognition advantage of having given its regional
banks a common name.
    Pinola said while its coastal state banks are in good
financial condition, First Interstate continues to sustain
serious loan losses in its Rocky Mountain states, where energy,
real estate and agriculture dominate the economy.
    Asked if he thought loan losses in those areas had peaked,
he said, "I don't think it has bottomed out, because I think
most of the problems are real estate-related and the real
estate problems are going to be with us for several years."
    Pinola said another failing economic sector, agriculture in
the Midwest, has slowed expansion of First Interstate's
franchise operation.
    First Interstate has 42 franchise banks that offer First
Interstate financial services in ten states.
    While a year ago he was considering taking his franchise
operation east of the Mississippi River, Pinola said because
most of the franchise banks are now in the West, expansion into
the Midwest must come first.
    Calling the franchise system, "moderately profitable,"
Pinola said, "It is going to take a rejuvenation of the
agriculture sector for us to commence franchising at the speed
we were generating before the last year or two."
    On the banking industry in general, Pinola said he thinks
1987 will be another bad year for loan losses, with only banks
with minimal holdings in real estate able to improve profits.
 Reuter
