Commercial banks continued to eat into investment banks share of the junk-bond pie last year.

Seven commercial banks ranked among the top 20 issuers of junk deals, up from five in 1995, according to yearend data from Securities Data Co. These banks had a combined market share of 18.7%, up from 15.2% in 1995, and 11.9% in 1994.

Bankers Trust New York Corp. was the busiest commercial bank, managing $4.2 billion in high-yield debt to grab seventh place for the year and sixth place for the fourth quarter. Meanwhile, Union Bank of Switzerland and NationsBank Corp. joined the top 20.

Investors said the difference between a high-yield deal led by the relatively new commercial banking entrants and those by the more established investment banking shops was fading.

"That gap is narrowing," said Thomas Haag, high-yield portfolio manager at the Lutheran Brotherhood. As more commercial banks swarm into the securities business, "they're all taking a little bit of market share from the investment banks."

The only noticeable distinction between the two, said Mr. Haag, is that commercial banks tend to be more careful about the risks because they are building reputations, while investment banks have already generated significant goodwill.

Certainly, investment banks continue to dominate the market, sweeping the top six positions. Boutique investment bank Donaldson, Lufkin & Jenrette maintained its grip on the No. 1 spot, issuing 60 junk deals with proceeds of $11.6 billion and grabbing a market share of 15.2%, up 13.1% in 1995.

No. 2 Merrill Lynch & Co. issued nine more deals than Donaldson, but only generated $9.63 billion for a total market share of 12.6%.

Bankers Trust slipped two spots - from fifth place in 1995 to seventh in 1996 - despite boosting its total junk volume by 38% to a personal best of $4.23 billion.

Chase Manhattan Corp. also dropped two notches in the rankings, to 10th place from eighth, despite raising $3.47 billion, up 3% from 1995.

"The overall market just got huge this year," said Arthur Penn, managing director at BT Securities, Bankers Trust's underwriting subsidiary. "'95 was driven more by leveraged buyout sponsors than '96," said Mr. Penn, referring to the financial buyers like Kohlberg, Kravis & Roberts and Hicks, Muse, Tate & Furst, with which both banks have very strong relationships.

These shops were not as active as in previous years because of the prohibitively high price of acquisitions in the soaring stock market.

Commercial banks have been building their high-yield bond businesses as a complement to their leveraged lending capabilities for the last few years, hoping to win the lucrative 2% to 3% fees on an average junk-bond deal.

Despite the continued dominance in the commercial banking ranks of Chase Manhattan and Bankers Trust, other banks made some headway, particularly in the fourth quarter.

CIBC Wood Gundy, which entered the business in 1995 when it purchased the Argosy Group, moved up in fourth-quarter rankings to 12th from 19th.

"We're a combination of a product area and a freestanding business," said Dean Kehler, a managing director at CIBC and a co-head of the high- yield group.

Mr. Kehler, a former head of the Argosy Group, said the high-yield group at CIBC can originate its own deals and can provide market access to customers from other product areas, such as loan syndications.

NationsBank Corp. ranked 14th last year leading over $1.3 billion in 14 deals, after failing to crack the top 25 in its first year originating junk bonds in 1995.

Rounding out the list of commercial banks among the top 20 issuers are Union Bank of Switzerland at 17th and Citicorp at 18th, both generating $527 million and a 0.7% market share. UBS did so in only five deals, while Citicorp led 11.

Securities Data Co. includes emerging markets and traditional public and private deals in its pool of high-yield data, while those at banks often exclude emerging markets bond issues.

- Daniel Dunaief contributed to this article.

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