First Chicago Shutting Emerging Markets Unit

First National Bank of Chicago said it is closing an emerging markets debt-trading unit in New York.

The closing of the unit, with 70 employees, was effective immediately with the announcement Tuesday. The decision was part of a $200 million, two-year cost reduction program linked to First Chicago Corp.'s pending merger with NBD Bancorp of Detroit.

First Chicago plans to retain other operations related to emerging markets, including corporate finance, trade finance, and risk management.

Despite "a positive revenue stream this year, we feel it (the emerging markets unit) does not have a critical fit with our international business," said John W. Ballantine, executive vice president for corporate banking.

He stressed that the bank will still support the international needs of corporate and institutional customers in treasury and risk management. And he did not preclude the possibility that other activities might be closed or cut back in connection with the NBD merger.

"We're in the process of going through everything we do now," the banker said.

First Chicago is the first major U.S. bank to exit emerging markets trading since the Mexican financial crisis last December triggered a sharp downfall in prices.

Other major players include J.P. Morgan & Co., Chemical Banking Corp., Chase Manhattan Corp., and Citicorp. Bank of Boston Corp. also recently set up an emerging markets corporate finance and debt trading unit.

Like others active in emerging market debt, First Chicago suffered a loss last year. The bank does not break down its figures for this type of trading, but Mr. Ballantine said its income has bounced back this year.

First Chicago said it intends to retain a small staff in New York and Chicago to assist clients during the transition, and to meet all outstanding commitments.

First Chicago got into trading of emerging market debt in the wake of the Latin American debt crisis. The bank subsequently built up a medium- size operation but never became a major player.

"They weren't particularly successful in emerging markets trading," said Raphael Soifer, a bank analyst with Brown Brothers Harriman & Co. in New York. "And this probably also results from the fact the business was not that important to them."

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