Predictably, customer service plummeted, and nearly one in five CoreStates customers fled to competitors in a matter of months.

The problems at First Union were not isolated. In the merger-mad ’90s, banks expected to lose as many as 15 percent of their customers after a merger. As long as they succeeded in quickly slashing costs and making the deal pay off for shareholders, banks just didn’t worry about it. Wells Fargo, for instance, suffered a similar fate when it acquired First Interstate in 1996 and rushed the integration process in its haste to cut costs. The CEO ended up apologizing to shareholders for the bungled acquisition. But First Union and Wells Fargo had the good sense to learn from their mistakes. Both have since engaged in carefully planned, well-executed mergers in which keeping customers happy?not cutting costs?was the number-one priority. Wells Fargo beat analysts’ earnings per share estimates after merging with Norwest; in contrast, virtually every previous large bank merger since 1995 had failed to achieve earnings targets. First Union merged with Wachovia, and today the combined bank can point to steadily increasing customer satisfaction scores (6.57 out of a perfect 7, according to Wachovia) and a 51 percent jump in stock price since the merger was announced. "Everyone has had to fail once big-time before they got religion," says Tom Brown, CEO of Second Curve Capital, a financial services investment company.

As a new round of megamergers gets under way?with Bank of America acquiring Fleet and Bank One joining forces with J.P. Morgan Chase?merging banks would do well to learn from these customer nightmare sagas and convert now to the customer-first religion. Since it costs five times as much to acquire a new customer as it does to maintain a good relationship with an existing one, it’s more important in the long run to hang on to your customers during a merger than it is to meet an aggressive deadline for squeezing out excess costs. Keeping customers happy, though, is devilishly difficult. Delivering accurate account balances, having ATM cards that work, and making sure tellers can answer questions and handle transactions efficiently all depend on seamlessly merging the two banks’ customer data and systems. Instead of being under the gun to cut costs and convert systems quickly, CIOs at customer-savvy banks are now expected to produce technology conversions so trouble-free that customers won’t notice anything beyond the new logo on their bank statements.