When Newton P.S. Merrill returned to Bank of New York in 1994 to run its trust and investment management unit, he seemed an unlikely choice for the job.

After all, Mr. Merrill's experience in investment management was scanty at best. A veteran commercial lender, Mr. Merrill had spent the past three years running global banking for Bank of Boston. Before that, he toiled more than 20 years in Bank of New York's corporate bank, where he worked his way up to U.S. commercial lending chief.

But today, Mr. Merrill says his intimate knowledge of Bank of New York's commercial clients is serving him well. For the 56-year-old banker has been able to breathe new life into a Bank of New York tradition that dates back to the 18th century: selling investment management and other private banking services to its corporate clients.

"Through our corporate banking accounts, we have created substantial wealth for individuals," Mr. Merrill said, referring to Bank of New York's rich history of lending to industrial magnates. "There is no reason we shouldn't be their financial partners."

To that end, Mr. Merrill has helped to rebuild a sales force of 18 bankers charged with introducing executives at Bank of New York's corporate clients to its private bank. At Mr. Merrill's urging, the bank draws many of the team members from the trust and investment management areas. And they are compensated based on the number of referrals they make to Mr. Merrill's unit.

Mr. Merrill also helped to integrate Bank of New York's disparate services for wealthy clients - trust administration, investment management, and high-end lending - into a single private banking unit. By putting these businesses in one place, Bank of New York can now more easily track a wealthy individual's relationship with the bank.

Mr. Merrill then took the integration one step further, installing an upgraded client management system in the private bank.

Analysts say the integration has helped to put the $53 billion-asset banking company's trust and investment management results back on track.

The businesses, which serve clients who typically have at least $1 million to invest, had been going gangbusters in the early 1990s, generating fee income of $110 million in 1991, $121 million in 1992, and $134 million in 1993. But the momentum slowed a bit in 1994, as fees dropped to $126 million.

The first full year into Mr. Merrill's tenure, however, trust and investment management fee income was up once again, jumping 8% to $136 million in 1995.

"This year they should be up a good 10% over that," said Dennis F. Shea, an analyst and managing director at Morgan Stanley & Co. Mr. Merrill, he added, is "extremely focused on cost control, efficiency, and overall profitability."

Another analyst, Lawrence W. Cohn of PaineWebber echoes Mr. Shea's optimism. In report on Bank of New York's first-quarter earnings, Mr. Cohn estimated that trust and investment management fee income will rise to $158 million this year and $170 million in 1997.

In addition to integrating trust, money management, and customized lending into a single unit, Mr. Merrill took pains to flatten the organizational structure of those business lines. Basically, he does not allow more than two bank employees to stand between himself and any clients.

If clients "want to pick up the phone and talk to me - for whatever that's worth - that's fine," Mr. Merrill said.

He said he also wants to be accessible to employees. So far, he is winning high marks from that camp.

"It's a very loose organizational structure," said one trust officer at the bank. People aren't afraid to talk to Mr. Merrill, "which makes for a good flow of information."

Bank of New York private bankers are now also using advanced technology to keep information about their $35 billion worth of accounts flowing smoothly. In his teak-walled office on Wall Street, Mr. Merrill can get complete data on each of the bank's private clients by simply flipping through screens on a laptop computer. Before, executives had to access several different computer systems to put a client's whole profile together.

Under Mr. Merrill, the trust department also had to integrate the $2 billion book of business it acquired when Bank of New York bought Putnam Trust last year. The acquisition gave the bank a springboard into the tony New York suburb of Greenwich, Conn.

"I would like to do one of those a quarter," Mr. Merrill said.

Still, the bank's primary focus remains on greater New York, he said. "We're not looking to replicate a Putnam in remote locations around the country," Mr. Merrill said.

However, the bank does maintain trust offices in Florida to accommodate aging clients who migrate there for retirement. Sticking to home base does not limit growth, Mr. Merrill said, because by his estimate approximately 20% of the country's affluent reside in the New York area.

"It doesn't matter what we do in the other markets that we're in," he said. "If we don't do the right job in this one, it's not going to matter."

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