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The banking industry is likely to continue consolidating in 1999, as banks aim to meet earnings expectations and build broader brand recognition.

Customers with bank accounts or credit cards through the nation's largest banks should not be surprised if their business is sold this year. The theme in the banking industry emerging from 1998 is that size clearly does matter.

But on the small end, Buffalo could see a new community bank in the market by summer. Organizers hope to open the Greater Buffalo Savings Bank if applications are approved by state bank regulators and the Federal Deposit Insurance Corp.

The new bank would have offices on Court Street and on Main Street at Jewett Parkway and could create 50 to 100 new jobs within three years.

Nonetheless, more than $1.2 trillion of bank assets were sold or merged in 1998, doubling the previous record of $544.1 billion set in 1995, according to SNL Securities.

The four largest bank mergers of all time were announced last year, topped by an $82 billion transaction between Citicorp and Travelers Group. The merger creating CitiGroup was also significant because it crossed industry sectors to form a powerful financial services group.

The merger activity continued into the fourth quarter, with Bankers Trust becoming the largest U.S. bank target in an acquisition by a foreign institution, Deutsche Bank.

Other growing U.S. banks clearly appear to be on the prowl for new acquisitions in 1999. Could Charlotte, N.C.-based First Union be showing its market intentions through television advertisements concluding that "the mountain will come to you"?

Technological changes revolutionizing world markets, heightened competition and pressure on bankers to increase earnings will continue driving mergers, according to industry representatives.

The pending liability of Year 2000 computer compliance could slow the pace of bank mergers as the year ages, they said.

"I suspect that merger activity could be fairly robust in the first quarter, subject to the stock market, but then it may slow down because of concern that the acquisition target is not Y2K compliant," said Gary S. Paul, senior vice president of M&T Bank.

The merger activity had a direct impact on the Western New York market.

M & T Bank jumped from $14 billion of assets to $20 billion by completing an acquisition of Syracuse-based OnBancorp. The deal also broke M & T into the Pennsylvania market for the first time, because Onbanc owned the 19-branch Franklin First Savings Bank in the Scranton area.

Marine Midland Bank also crossed the border by striking a deal for the two-branch First Commercial Bank of Philadelphia. The small bank caters to Philadelphia's Asian community, a niche Marine Midland already serves in New York City.

Both Marine Midland and M & T Bank continued to be two of the largest private-sector employers in Buffalo.

M & T Bank added 320 jobs in Buffalo, with a direct annual economic impact of more than $10 million, as a result of its Onbanc merger. M & T expects to close on a $129 million purchase of the 19-branch First National Bank of Rochester during the second quarter.

"We don't agree that size matters for size's sake. What we feel compelled to do is provide quality services and win the customer base in the markets that we serve," Paul said. "There have been some deals we would have liked to do, but we didn't because we couldn't get them at the right price."

Another growing bank is posing significant market competition for Marine Midland Bank and M & T Bank in upstate New York. Cleveland-based Charter One Bank, which entered New York in 1997 by swallowing Rochester Community Savings Bank, bought the 109-branch Albank Federal Savings Bank franchise of Albany last year for more than $1 billion.

One of the nation's big bank mergers brought a side benefit to Western New York.

BankAmerica, which became the nation's largest bank through a $66 billion merger with NationsBanc, is building a new 130,000-square-foot mortgage service center in Amherst. The mortgage center is still operating under the NationsBanc Mortgage Corp. name.

The new center will expand the bank's local staff of 670 employees by at least 142 jobs, and the center could employ more than 1,000 people in coming years.

The trend of reflecting size and global strength led to one of the more interesting moves in the Buffalo business community in 1998. Marine Midland Bank announced it will ditch its 150-year-old identity this year in favor of the HSBC name.

Marine Midland is owned by HSBC Holdings plc, of London. HSBC owns numerous banks, with 5,500 offices operating in 79 countries, and is trying to reflect global strength with a single brand name.

Though many local residents bemoan the loss of the Marine Midland name, bank CEO Malcolm Burnett said having the American headquarters of one of the world's largest banks is good for Buffalo.

"This change of brand is an exciting move. It does broaden and strengthen our commitment to Western New York," Burnett said. "It strengthens the bank and this region and gives (customers) easy access to world markets."

Marine Midland and most other banks are also expected to continue strengthening their insurance and investment services. Banks are trying to develop one-stop shops to provide all the financial services that any individual or business needs.

"Customers are moving away from going to different shops for different services. They want to go to one shop," Burnett said.

KeyBank wants to promote its brokerage and investment management services to more Western New Yorkers in 1999. KeyBank expanded its business in 1998 by purchasing a mortgage company, leasing company and investment company.

"Nationally, the industry continues to change and evolve, and we feel we've positioned ourselves as a leading financial services provider," said Marsha Henderson, Western New York district president of Cleveland-based KeyBank. "In the case of KeyBank, it's better to be bigger. Our customers get the advantage of the research, technology and product development we can leverage across the country."

Fleet Financial Group also beefed up its lines of business in 1998 by purchasing credit card portfolios and a discount brokerage.

Even small community banks are feeling the pressure to merge. Because of shrinking interest-rate margins, small banks will have a difficult time increasing earnings in 1999.

Loan demand for the small banks may also diminish in 1999 if the economy cools, said John L. Pritchard, executive director of the Independent Bankers Association of New York.

Community banks will also be under increased competition from credit unions in 1999, which are trying to broaden their memberships as a result of favorable legislation passed in 1999.

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