J.P. Morgan & Co.'s rank within the top five syndicated lenders may rise or fall, but to its executives that movement is inconsequential.

"We're perfectly resigned to the fact that if our chosen client base goes quiet for whatever reason, we may slip back, and so be it," said Joseph P. MacHale, head of global credit at J.P. Morgan.

"Market share is important to us only inasmuch as it is important that we are in enough of the flows and doing enough deals that we know exactly what can and can't get done in the market," he said.

Although it is the firm's push into traditional investment banking activities-such as merger and acquisition advice and equity underwriting- that has received most of the limelight in recent years, J.P. Morgan remains a powerhouse in the traditional bank business of loan syndications.

Indeed, the bank claimed 22.6% of the syndicated lending market in the second quarter, second only to Chase Manhattan Corp.'s 47.5%, according to Securities Data Co. It was fourth in the third quarter of 1996.

Observers noted that it is J.P. Morgan's client list, rather than aggressive marketing, that drives the syndications business. Because of a decidedly blue-chip client base, J.P. Morgan tends to make larger loans than any of its competitors.

According to a study by BankAmerica Securities Inc. and Loan Pricing Corp., J.P. Morgan has had the largest average deal size for agented transactions over the past four years. Loans made in the first half of this year averaged $1.05 billion, while Citicorp had the second-highest average at $761 million.

The firm's client roster includes some of the largest and best- capitalized companies in the country, such as General Electric Co. and USX Corp., powerhouses that only rarely require leveraged financing.

"They're organized around clients, and the reason it's been a good market for syndications is because clients have made extensive use of syndicated lending as a financing vehicle," said Raphael Soifer, a bank analyst with Brown Brothers Harriman.

That focus on clients means that the firm's volume of lending - and its consequent rank among lenders - will move in line with its clients' activities. But that is just fine with J.P. Morgan.

"It is not transactions for transactions' sake, it is transactions that support our clients," said Mary Watkins, managing director and head of syndications at the bank.

The firm is structured as an investment bank, with lending operations run the same way as its other capital markets products, such as high-yield debt.

"We're set up differently from much of our competition, because we have different capabilities," said Ms. Watkins.

The credit operation includes loan capital markets, which does marketing and deal management; a syndicate group that performs market research and manages bank groups; and a distribution and par loan trading operation.

Profits from the business are steady if somewhat small relative to the rest of Morgan. Lending, along with merger and acquisition advisory work and debt and equity underwriting, contributed less than a quarter of the company's revenue in 1996, according to company reports.

"The revenue which they define as credit-related has been a relatively small and stable component of their business," said Mr. Soifer.

"But on the other hand, it's been a great year for syndications activity and they've taken their share of that," he added.

One such loan, a $13 billion credit issued late last year backing railroad operator Norfolk Southern's bid for Conrail, was co-agented with Merrill Lynch. The relationship between J.P. Morgan and Norfolk Southern dates to the founding of the railroad operator, almost 100 years ago, according to the bank.

But because the bank's clients tend to be investment-grade, J.P. Morgan has not had the same impact in the more profitable leveraged lending business.

"The tendency is for them to say, 'We're Morgan; people will come along with us.' And I think that's true when it's investment grade," said one syndicated lender. "But it's not true of leveraged deals because I don't think they know that market that well."

On leveraged lending league tables, J.P. Morgan's rank has fluctuated wildly from as high as second place in the third quarter of 1995 to as low as 38th in the third quarter of 1996, according to Securities Data. Most recently the firm ranked ninth.

J.P. Morgan plans to make inroads into the key community of dealmakers and financial sponsors to win over more leveraged lending business.

"We believe that we can be far more relevant to financial sponsors than the majority of our competitors," said Mr. MacHale. "I would say, 'Watch this space,' because the leveraged deals we do now are leveraged deals that come from the nonfinancial sponsor client base."

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