Before Frank J. De Francis resigned his post in the Maryland government to become co-owner of Laurel Race Track, the longtime horse lover oversaw cutthroat competition on another front: He was the governor's point man in the push for interstate banking.

A new interstate banking law De Francis helped initiate went into effect last July, but one year later, bank-holding companies in Maryland are still at the starting gate in the nationwide scramble to expand markets by crossing into neighboring states.

To some observers, Maryland banks hardly appear in the running: Despite a flurry of in-state mergers, no major Maryland bank has set foot outside the state.

Instead, all have watched from the sidelines as their turf has been invaded by a handful of small and medium-sized bank companies from Virginia, the District and North Carolina, and by banking behemoths such as Citicorp, Chase Manhattan Corp. and Mellon Bank Corp.

"It's puzzling," mused A. Lau, president of Citicorp's new full-service bank in Maryland, which opened last week after a three-year lobbying effort by the New York banking giant.

But De Francis said Maryland still has time to join the race and is in a good position to capitalize on interstate banking. "To the South, we're considered a northern state, and to the North we are considered a southern state," he said. "We're clearly a focal point and a place where companies want to buy into."

Industry leaders and analysts say several factors lie behind the inactivity of Maryland banks, most of it boiling down to a wait-and-see attitude that the institutions have applied to everything from pending bank bills in adjoining states to Maryland's year-long savings-and-loan industry crisis.

"It's like bouillabaisse," said De Francis, referring to French fish stew. "It's a mix of ingredients."

Maryland, like most states in the nation, has devised an interstate banking law to grapple with financial service deregulation and the pressure to allow bank institutions to cross its borders.

As local bankers in many states discover, however, newly enacted laws don't always have the intended effect.

Maryland's law was intended to keep out-of-state financial giants from entering the state too soon. Nonetheless, Citicorp, Chase and Mellon have gotten in through legislation or by acquiring troubled S&Ls.

Until July of next year, Maryland has banking reciprocity only with the District and Virginia. (Maryland's inclusion of Delaware and West Virginia in its current law is moot because those states do not yet let Maryland banks cross their borders.)

Most observers of the local banking scene predict the next several months will see more mergers, but most of them will continue to come from outsiders buying Maryland banks.

Although most D.C. bank companies expect to be purchased, several have made purchases in Maryland and Virginia with the intent of increasing their attractiveness while waiting for suitors.

In contrast, most of the top Virginia banks have forged strategies to become independent regional players, at least for the next several years.

The strategy for Maryland banks is less clear-cut. Most of Maryland's biggest banks publicly blame their lack of activity on uncertainty over whether to opt for a merger or for independence. But most bankers say privately that they expect most of the state's bank companies to fall to out-of-state buyers.

An exception is Maryland National Corp., the largest bank-holding company in the state. Observers say it is the most likely to make its own purchases in surrounding states and try to build a regional presence, a scenario that matches the one the bank's own management likes to give.

Thomas H. Maddux, who took over from De Francis as economic chief for Maryland Gov. Harry Hughes in January 1985, doesn't feel any threat from the onslaught of outsiders.

"There won't be any more banks here, their names will just change," he said. "It's all a part of the national deregulation process when you come right down to it."

"It would have happened one way or another no matter what the state did. But I'd like to see at least one big bank remain that's headquartered here. I think that's important for the state," he said.

Many local bankers paint a more urgent picture, saying a decline in the number of companies based in the state could hurt local charities and art organizations because corporations tend to make their biggest contributions to nonprofit groups in their home state.

Analysts say one reason Maryland institutions will tend to be acquisition targets is that the state's largest banks are smaller than many of their regional peers.

Sovran Financial Corp of Richmond, for example, had assets of $9.7 billion when it completed the purchase of Virginia's fourth-largest bank, Suburban, this year.

NCNB Corp. of Charlotte, N.C., the largest bank-holding company in the Southeast, which recently announced its intention to buy a small Maryland thrift and convert it into a bank, had assets of $19.8 billion at the end of 1985.

By comparison, Maryland National had $7 billion, and the second-largest, First Maryland Bancorp, had $4.5 billion.

Another explanation is that Maryland banks for decades have been allowed to expand statewide by adding a branch here and there.

Virginia banks, in contrast, could expand within the state only through acquisition, a requirement that has helped make them more aggressive, experts say.

Geography also has played a role in the different attitudes among banks in the two states, local bankers say.

Virginia banks have looked to expand north along a fast-growing corridor from Norfolk to Baltimore. But most Maryland banks eye a market that extends north and south, from Northern Virginia through Pennsylvania, Delaware and even New Jersey.

The result is that Maryland institutions have waited to see how neighbors, such as Pennsylvania, which passed a bill just two weeks ago, would approach interstate banking. Banks Assessing S&L Damage

And, of course, government and industry officials say, Maryland banks have been waiting to measure the damage from the state's S&L crisis, the worst in the United States in 50 years.

The problem, which began in early 1985, enabled Chase and Mellon to buy ailing thrifts, convert them to banks and get into the state one or two years earlier than Maryland law otherwise would permit -- or than local bankers wanted.

"Have the local banks embraced the competition? No. But are they dealing with reality? Yes," Maddux said.

Local bankers concede that out-of-state giants eventually would have found a way into the Maryland market, and that the S&L crisis just accelerated the process.

They say that while the crisis won deposits for banks, it also fostered distrust of all financial institutions, and so it needed to be solved quickly.

"We knew Chase and those guys would get in," said Richard A. Jennison, assistant vice president of Citizens Bank of Maryland, the eighth-largest bank company in the state. "We just wish it had been later rather than sooner."

Since the first phase of Maryland's interstate banking bill took effect last July 1, a spurt of mergers has followed.

Five of Virginia's largest bank companies have bought institutions in Maryland and the District. Several D.C. bank companies have made purchases in Virginia or Maryland.

Under a separate bill, Citicorp set up shop in the state a full two years before Maryland law permits other financial giants from New York and other money centers to enter. The legislature permitted Citicorp to enter the state in exchange for a $25 million investment in a credit-card center that provided 1,000 new jobs.

NCNB has agreed to buy a small Maryland bank, even though the deal cannot be completed until next July 1, when Maryland law permits North Carolina companies to make acquisitions in the state.

The mergers underscore the inactivity of Maryland banks. And so do early attempts by Maryland banks to get into the District prior to enactment of the state's reciprocal banking law.

In early 1985, for example, First Maryland and Equitable Bancorp., the state's third-largest bank company, applied to open controversial limited-service, or nonbank banks, in the District. The applications are frozen by a court order banning new nonbank bank charters until a lawsuit challenging such banks is resolved, which could take years. In the meantime, neither bank has succeeded in finding another route out of the state.

Most local bankers insist that as long as the fighting is fair, they can survive an earlier-than-expected, head-to-head battle with big banks from New York and Pittsburgh.

They worry, however, that the banking giants could steal their best talent or will cut prices and start a price war.

"What for Chase and Citicorp and Mellon would be pocket money would seem a large amount of money for the largest local banks," said Harry J. Weitzel Jr., senior vice president of Maryland National.

Executives at Chase and Citicorp pooh-pooh such worries.

Stanley Burns, president of The Chase Bank of Maryland, which opened in November with 13 branches in the state, said that contrary to sparking price wars, Chase hopes the demise of the state's high-flying S&Ls, which often paid sky-high prices to attract deposits, will restore stability to interest rates.

Citicorp's Lau agrees. Lau also said Citicorp isn't likely to raid local corporations because it prefers "home-grown" employes, trained by the company "from the ground up."

Despite such assurances, no one can mistake the cutthroat competitive spirit of companies like Citicorp and Chase. "It's not enough to be friendly," said Lau. "We'll build long-term relationships based on superior service."

Lau makes all his employes wear dark blue suits and white shirts, which he said "creates an air of professionalism." Putting on IBM Airs?

Any resemblance to attire of computer giant International Business Machines Corp. may not be accidental. "Everyone can learn a lot from IBM," Lau said, commending IBM for "understanding" that it is in the "service business, not the computer business."

Lau himself sports a tie that symbolizes Citicorp's intention of becoming a major consumer banker in every state; the dark-blue neckpiece is dotted with maps of the United States, each one containing the Citicorp emblem. Unlike many maps of the United States, however, Citicorp's includes Alaska and Hawaii.

Maryland's new arrivals appear more worried about competing with each other for market share than with local banks.

"Super-regionals" from the Southeast, such as Sovran and NCNB, have the size, strength and knowledge of local markets to give the New York and Pennsylvania giants a run for their money, analysts say.

Last Monday, the day before Citicorp's new office in downtown Baltimore was set to open, Lau noticed that an official from Union Trust Bank, recently purchased by Bank of Virginia Co. of Richmond, had sneaked into the lobby to collect Citicorp brochures.

How did Lau recognize the competition? "I know him from when I went into their bank one day," he said.