Fleet Securities Inc. is carving out a place for itself in a business that others are leaving.

The section 20 subsidiary of Boston's Fleet Financial Group has spent the past year building its presence in the municipal bond market. It has already hired 15 bankers with public finance backgrounds and expects to add 25 over the next two years, according to its top executives.

The expansion comes as big Wall Street firms-including Credit Suisse First Boston; Donaldson, Lufkin & Jenrette; and Lazard Freres & Co.-are withdrawing from the municipal bond business.

Though the market is largely characterized by increasing risk, thinning spreads, and declining volume, Fleet executives point out that cities and states will always have financing needs.

"As others leave the business, we will expand to fill the void created by their departure," said Joseph A. Harcum, chairman and chief executive officer of Fleet Securities.

Fleet Securities, which employs about 130 people, including 35 investment bankers, is in the midst of a five-year growth plan. Over the next two years Fleet expects to double its municipal sales staff to include 100 retail and institutional salespeople.

Retail sales are believed to offer better spreads and less risk than other parts of the muni business.

Fleet's emphasis on municipals sets it apart from the section 20 subsidiaries of other major banks, which are used to house or complement their parents' corporate finance efforts. Though Fleet Financial began building its corporate finance business last year, it has not yet asked the Federal Reserve Board for permission to underwrite corporate securities.

So far Fleet Securities' focus on munis is paying dividends, its executives say. "We feel that we've made an enormous amount of progress in a short period of time," said Maria Nolan, senior vice president and manager of the mid-Atlantic region at Fleet Securities.

Ms. Nolan said that Fleet Securities has raised its profile with the majority of major municipal bond issuers and syndicators throughout the Northeast. She said hopes the next few years will allow Fleet to win over more top positions.

"Our target is to elevate our status with the larger issuers in our franchise. In situations where we are a co-manager, we'd like to be elevated to a senior manager," she said.

In the first half Fleet ranked No. 13 among lead managers of municipal bonds in the Northeast, according to Securities Data Co.

"The municipal finance business is a meaningful business for Fleet," said Catharine Murray, senior U.S. bank analyst and managing director of J.P. Morgan Securities Inc. "They are the No. 1 depository bank in the country. One of the reasons for that is that they do very significant business with a lot of the local and state governments in the New England area."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.