Leslie Hannafey, Natwest Markets' new senior banker in charge of East Coast financial institutions, has some heavy lifting ahead of her.

Until late last year, Natwest, the investment banking arm of London-based National Westminster Bank. PLC, did not house a financial institutions group. Now, the firm hopes to muscle in on the Wall Street fraternity that controls the lucrative bank mergers and acquisitions advisory business, and it is looking to Ms. Hannafey to help lead the way.

In March, the firm hired Ms. Hannafey away from Commonwealth Associates, a small corporate boutique where she was managing director of corporate finance. Among her new missions is to expand Natwest's M&A business with East Coast financial institutions.

West Coast Team

Her role is parallel to that of former Oppenheimer & Co. senior vice president Cary Thompson and four of his colleagues, who were lured away by Natwest in March to focus on West Coast financial institutions.

But compared with Mr. Thompson, Ms. Hannafey is a relative unknown.

One investment banker, questioned about her, asked if Ms. Hannafey was an equity analyst.

"She was a securitization person," a former colleague said. And prior to a role in implementing the much-ballyhooed Mellon Bank Corp. good bank/bad bank deal while at Drexel Burnham Lambert in 1989, Ms. Hannafey had no experience with banks whatsoever, this colleague said.

Securities Background

In fact, Ms. Hannafey's background is in securities. Her press relations person jokingly called her the "Queen of Capital."

So why did Natwest choose Ms. Hannafey?

"We wanted to hire a generalist," said Joe Adams, executive vice president at Natwest Markets. "M&A would be one of her issues."

It is important to offer clients a range of services, he explained. Anyway, he continued, she has plenty of experience related to M&A and is totally suited to the new job.

Natwest, unlike most of its competitors, does not offer a pure bank M&A specialist. It has M&A specialists with a broader financial background. The idea is to provide clients with a multifaceted approach that other firms lack, Mr. Adams said.

Additional Duties

Ms. Hannafey said that she will help oversee the group and help develop clients, in addition to her financing assignments. And she argued that she could bring a wealth of experience to the table that the typical investment banker, who just concentrates on bank M&A, cannot.

"When you are in banks ... they have loan portfolios to every sector, and I understand paper, retailing, technology because of my" capital raising experience, she said.

And with banks moving into other financial sectors, like insurance, Ms. Hannafey says she can use her expertise in these areas to draw clients.

But Ms. Hannafey said her main selling point is her ability to innovate.

Bad-Bank Concept

While at Drexel, Ms. Hannafey participated in the bailout of Mellon Bank, in which Drexel engineered the creation of a new bank - Grant Street National Corp. - to absorb Mellon's nonperforming assets, which had grown to eight percent of all loans. Grant Street was then liquidated in a deal that provided a model for other banks a few years later that turned to securitization as a way to escape bad real estate loans.

While at Smith Barney in the early 1980s, Ms. Hannafey helped develop a dual option warrant for Trans World Airlines, which gave the buyer the option to either buy a stock by itself or in conjunction with another piece of paper - an innovation at the time, she said.

"It's what I do best, one-of-a-kind projects," she said. "I expect here I will come up with something very unique," she added, politely refusing to divulge any details.

Clients Not Revealed

She also refused to divulge the names of any Natwest M&A clients. The unit underwrote $3.2 billion of convertible securities, making it No. 6 on Wall Street last year, the company said. But its contacts in the bank M&A business are not highly regarded.

The company has added a respected equity analyst - Stephen Berman, formerly of Nomura Securities - but will surely not get the windfall of new clients CS First Boston received two years ago when it raided Salomon Brothers and hired Thomas Hanley, considered by many to be the leading bank equity analyst.

One investment banker smirked at the mention of Natwest, waving the group away as inconsequential.

But Ms. Hannafey is certain that merger mania in the banking industry will create openings for the new player.

"We see a tremendous amount of advisory work that we can do in addition to financing, and financial institutions have performed exceedingly well," she said. "The larger banks are so well capitalized, their loan quality is so good, their earnings potential is really great."

Stiff Competition

And more important, she is sure the team Natwest has assembled will be able to take on the Goldman Sachses and the Morgan Stanleys of the world. While conceding the team had yet to make many inroads, she predicted clients would soon be forthcoming.

As she moves to make her imprint on the group, her vision of the industry is fairly straightforward. As the pace and size of mergers have slowed somewhat in recent months, some have predicted a cooling off phase, at least in some regions.

But Ms. Hannafey predicts that M&A activity will continue unabated in all areas of the country.

And for banks that are poised to move into other financial sectors, she says Natwest is ready to offer its expertise in new areas such as insurance.

Reputation for Integrity

Where Ms. Hannafey really sets herself apart is in her integrity and honesty - traits lacking in many investment bankers, said Marshall V. Davidson of Adams Cohen & Associates of Great Neck, N.Y., who claims credit for designing the Mellon deal at Drexel in the late '80s.

"If I were interested in sound advice, she would be one of the persons I would seek out," he said.

Before arriving at Commonwealth Associates, Ms. Hannafey was a vice president of Adexpress Co. in New York from 1991 to 1992. She worked at Drexel between 1984 and 1990, and with Smith Barney from 1976 to 1984.

A native New Yorker, she received an MBA from the Harvard Graduate School of Business Administration, and a BA from Fordham University in economics and philosophy.

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