BANK MERGERS TO MEAN INCREASED AD SPENDING: FINANCIAL GIANTS BUILD BRANDS AS THEY BRANCH OUT

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The onrush of bank megamergers points to a future where the new financial giants will have to spend more on advertising.

Banking companies, long notorious for being rather primitive marketers, will be forced to spend more on brand building as they branch into new territory and add products and services, industry officials and observers agree.

To give their brands a single voice, banks also are likely to keep agency rosters relatively small.

"I would expect that spending will rise," said Jim Garrity, senior VP-director of advertising for First Union Corp. "There will be needs to communicate on an array of topics, including new names."

BIG AD BOOSTS

First Union knows. Last year, the company broke its first-ever brand campaign from Hal Riney & Partners, San Francisco, to establish its name in Northeastern markets it gained by buying First Fidelity Corp.

To do that, First Union budgeted $85 million for advertising, more than double its 1996 outlay, the bank said.

Ad spending is rising everywhere as banks expand into new lines of business, competing against financial giants such as Merrill Lynch & Co. Banks plowed $794.1 million into advertising last year, according to Competitive Media Reporting. That's up 6.1% from 1996 and 14.4% over '95.

The competitive challenge will be paramount to Citigroup, the proposed union of Citicorp and Travelers Group that would offer banking, insurance and investment banking services under one roof.

Officials from the two companies were unavailable for comment, but Brian Ruder, senior VP-marketing for Citibank, is planning to meet with his Travelers peers soon to discuss strategy, a bank spokeswoman said.

Y&R Advertising, New York, handles global advertising for Citicorp. McCann-Erickson Worldwide has Travelers' Salomon Smith Barney; Merkley Newman Harty handles Travelers' corporate ads, and last week broke a new campaign for the company.

Expanding banks face the challenge of entering new markets.

Banc One Corp., the biggest Midwestern bank once its pending acquisition of First Chicago NBD Corp. is completed, is weighing this right now. The Banc One name will be moving into Chicago and Michigan, markets where it has had a negligible presence.

First Chicago is handled by an alliance between Fitch Inc., Ann Arbor, Mich., and LaRowe Advertising, Chicago. Martin Agency, Richmond, Va., handles Banc One.

NAME SENSITIVE

"People in those markets like the name that they knew before, and we have to be very sensitive to that and key our program off that," said Ken Stevens, CEO-national retail division for Banc One.

The NationsBank Corp./BankAmerica Corp. merger will face this issue as well when the Bank of America name is adopted in the new entity's 22-state territory.

Deutsch, New York, handles BankAmerica; Temerlin McClain, Dallas, handles NationsBank.

"It's becoming a branding game for the larger players," said Michael Newbrand, senior VP-integrated contact planning for the Martin Agency and former head of the Banc One account. "You're no longer dealing with the limitations of geography, you no longer have a captive" audience.

SMALL BANKS GET PERSONAL

Smaller banks have and will continue to try to set themselves apart by running ads that picture their megamerged rivals as impersonal.

Glendale Federal Bank, at that time handled by BBDO Worldwide, Los Angeles, did this in California at the expense of Bank of America, and Wells Fargo Corp. Wilmington Trust last week broke a campaign from Korey Kay & Partners, New York, using this theme.

The overlap of banks and other financial companies will inevitably create account conflicts at agencies.

Foote, Cone & Belding and Grey Advertising, both New York, were dropped from the Merrill Lynch review because they wouldn't drop out of the one being conducted by Chase Manhattan Corp.

A narrowing of agency rosters already is happening. Citicorp last year consolidated virtually its entire global account with Y&R, and First Union whittled its roster of many direct marketing agencies to two: Hill Holiday Direct, Boston, and Earle Palmer Brown, New York.

"To the extent that companies are trying to build a single brand . . . there will be fewer agencies over time," Mr. Garrity said.

"It makes more sense to work with one agency that's providing all the services you need," said Stephen Cone, president of customer marketing-personal investments and brokerage group for Fidelity Investments.

Contributing: Mercedes M. Cardona, Laura Petrecca.

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