The Second City has become a second home to Amsterdam's ABN Amro Holdings PLC.

Since 1988, the company has gone on a buying spree in Chicago, culminating with its acquisition last year of Talman Home Federal Savings and Loan Association.

ABN Amro now operates nine retail units in the metropolitan area, with a total of $16 billion in assets. And it has no intention of stopping. "Chicago is such a fragmented market, we have plenty of ways of strengthening our base right here," said Harrison F. Tempest, chief executive of LaSalle National Corp., ABN Amro's lead bank.

Presence in New York, Too

That's not to say the giant Dutch bank lacks a broader reach in the United States. Via its 10 U.S. branches, ABN Amro is a major force in American corporate banking. And it is a player in the New York City market through its ownership of European American Bank, with $5.6 billion in assets and 88 branches.

But since 1979, when ABN Amro entered retail banking in the United States by acquiring LaSalle, its biggest effort has gone into building a network of super community bank in Illinois.

In 1988, ABN Amro acquired W.N. Lane Inter-financial Inc., a $1.6 billion-asset bank holding company. The following year, it acquired the $3 billion-asset Exchange Bankcorp. Then came the deal for Talman, with $5.8 billion in assets.

With $35 billion in U.S. assets at yearend -- including syndicated corporate loans made out of Chicago -- ABN Amro ranked as the nation's 20th-largest banking group, just after SunTrust Banks Inc., Atlanta, and just ahead of Republic New York Corp.

The bank's target for U.S. assets is $40 billion, though it has not set a deadline for getting that big.

Window of Opportunity

ABN Amro, which has $242 billion of assets worldwide, began its U.S. foray in the 1970s when its management realized that expansion opportunities in Europe were limited.

"The bank concluded there was a big market here and decided to make the U.S. its second home country," said Peter Casey, executive vice president for ABN Amro North America Inc., the bank's U.S. and Canadian holding company.

Since its expansion was concentrated in Chicago, ABN Amro avoided the real estate and commercial lending losses suffered by banks in the Northeast and California.

"By concentrating on banking operations in the Midwest, they avoided the worst asset-quality problems, especially with the property market," noted Alan Broughton, a banking analyst with Morgan Stanley & Co. in London.

"LaSalle is essentially a community bank that never really got into cross-state business or large corporate business," added Robert Law, a banking analyst with Lehman Brothers in London.

"As a result, credit quality remained reasonably robust and profitability remained healthy."

|An Independent Business'

Mr. Tempest said another reason ABN Amro avoided problems was that it let local managements run their own shows while integrating back-office operations to reduce costs -- the two hallmarks of the super community bank structure.

"We manage each entity as an independent business," Mr. Tempest said. "Experience has taught me a person acts very differently when you call him a bank president than when you call him a regional manager."

A native of Illinois, the 56-year-old Mr. Tempest knows his market well and gives top priority to retaining good banking officers and customers.

"One thing companies hate is having to explain themselves all over again to new calling officers," Mr. Tempest said.

A Shifting Market

And that's especially important in Chicago, where companies can be quick to shift business to another institution if they think they can get better service elsewhere.

"A purist would say you need to merge everything to get economies of scale," Mr. Tempest said. "You might get economies of scale, but you won't have any customers and I'd rather have the customers."

They're a very aggressive player in the Chicago market," said Rick Jacobus, an analyst .with the Chicago Corp. They've maintained strong local relationships and strong local image."

Strategy Questioned

Louis Gorbena, a partner and chief executive officer of Brooklyn Bagel Boys, a bagel supplier in the Ghicago suburb of Franklin Park, noted: "We had there or four different banks come after our business, but none of the others were as creative, aggressive, and accommodating as LaSalle."

Matthew Czepliewicz, a London-based bank analyst with First Boston Corp., questioned the Dutch banks super community banking strategy, however.

"What they're doing diversifies earnings, it's economically justifiable, but it doesn't seem to support any sort of coherent strategy," he said.

ABN Amro officials, however, see no lack of logic in their strategy.

They said ABN Amro's U.S. operations are prudently balanced, with roughly 60% of total U.S. assets in the retail and middle-market sectors and the rest in the large-corporate area.

"We're looking for both an indigenous presence and global relationship with U.S. corporation," said Mr. Casey.

Last year, U.S. profits totaled $253 million, or 32% of ABN Amro's worldwide net profits.

LaSalle National eraned $92.6 million last year. Its return on equity of 15.81% ranked it eight among U.S. banking companies having $10 billion to $20 billion in assets. Its 0.96% return on assets ranked 12th, according to data compiled by American Banker.

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