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JULIE SABLE

Staff Reporter

Shortly after Wells Fargo Bank acquired First Interstate Bank, billboards went up all over town asking motorists how many Wells Fargo branches they had passed on their way to work.

On the surface, the ad campaign was about touting the bank's number of branches. But it also addressed one of the biggest complaints from consumers about bank consolidations the closure of branches.

"The branch is important to a neighborhood and can stabilize a neighborhood," said Gail Hillebrand, an attorney with Consumers Union of U.S., Inc., a non-profit publisher of Consumer Reports magazine.

"Take the business owner who cannot make his night drop at an ATM and now has to drive further to get to the closest branch to make that deposit," she said. "That takes time away from his business."

Hillebrand and other consumer advocacy groups also complain that bank mergers diminish the amount of loans available for small businesses and hurt those individuals and businesses who do not like banking over the phone or computer.

But banking industry officials counter that consolidations generally are beneficial, saying that consumers get more banking options, a greater variety of banking services and the ability to do business with a stronger institution.

Who's right? Both sides, according to Conrad W. Hewitt, superintendent of banks for the California Department of Banking.

"Closing banks sometimes hurts (and) sometimes doesn't hurt the consumer," Hewitt said.

Although branch closures can be an inconvenience, "consumers benefit from additional financial products and if branches close, there are usually other branches or ATM's in the area so the impact is not all that dramatic," he said.

Hewitt also said that bank consolidations benefit consumers indirectly by weeding out the weak banks that might fail in hard times.

"There are a large number of problem banks that would get into trouble if California has a recession," he said. "Also, there is plenty of competition from non-banks that take deposits and offer banking services to consumers.

Critics and supporters of bank consolidations agree on one point: the bigger banks that drive the consolidations generally offer a greater variety of banking options, such as banking kiosks in grocery stores.

And that trend is only going to continue, as the satellite banking locations begin offering non-bank services, including sales of theater and ski lift tickets, said John Stafford, spokesman for the California Bankers Association.

"As consumers get more used to alternate styles of banking, they will probably find that these types of services are very useful and convenient," Stafford said.

Bigger banks also give consumers more flexibility to bank by phone or computer, said said Lisa Margolin-Feher, a Bank of America spokeswoman.

"As a direct benefit to Bank of America customers, the mergers have allowed us to devote more resources to development of additional services such as telephone banking," said Margolin-Feher.

But while the banks are quick to promote the expansion of products and services to consumers, Hillebrand is not convinced that consumers want that.

"What they want is to walk into their familiar branch and see a familiar face," she said. "As banks become larger they tend to become more centralized and instead of going to the branch, you now do the banking by picking up the phone."

"For the consumer who doesn't feel comfortable providing their financial information over the phone, this is a problem," Hillebrand said.

Officials with Sanwa Bank California generally agree with the consumer advocates, saying that customers inevitably lose when small banks are swallowed by big ones.

"Mergers are really transactions that are not designed for the consumer," said Doug Steward, first executive vice president at Sanwa. "The mergers are designed for the shareholder, to enhance shareholder value."

There is also a difference in the way customers are treated, said Craig Hudson, executive director of California Independent Bankers, an organization that represents 200 independent banks.

"If you go into a big bank, they make you feel small. If you go into a small bank, they make you feel big," Hudson said.

"For the small business owner who had a personal relationship at his bank that is now the subject of an acquisition, the personal relationship will disappear," he said,

But according to Stafford, most customers don't need personal service for most of their banking needs.

He said banks are finding that 70 percent to 75 percent of consumer transactions are being performed outside of the bank, such as at an ATM, over the computer or by telephone.

"Sixty percent of bank customers say they never go inside a branch to conduct their banking activity," Stafford said.

Hewitt says that, despite the criticism, the consolidation trend is going to continue. And while consumers and bankers can debate the impact, one thing is certain, he said.

"The banking industry is the healthiest it has been in 15 years," Hewitt said.

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