Keefe, Bruyette & Woods Inc., a Wall Street firm specializing in banks and thrifts, has shelved its plans to go public.

Executives at the New York investment bank decided late last month to cancel their initial public offering, which had been in the works for several months. A prospectus was filed Aug. 14 with the Securities and Exchange Commission.

Commercial and investment bank stocks have been particularly hard hit in the recent market downturn. The Keefe Bruyette bank index, which tracks the stocks of the 24 biggest banks, has plummeted 36% from its mid-July high. Meanwhile, many of the biggest investment banks are trading at less than half their peak valuations.

Given the market's continuing turmoil, Keefe Bruyette executives decided to put off their IPO until further notice.

"For all intents and purposes, it's dead," said John G. Duffy, executive vice president and co-head of corporate finance. "We deal in the markets every day, and you can't force something like this when the market is the way it is."

Goldman, Sachs & Co. reached a similar conclusion, also deciding to shelve its IPO late last month.

While Goldman's decision may have been affected as much by the collapse of emerging market bonds and falling stock markets around the world, Keefe Bruyette was hurt by the sharp and sudden fall in bank stock prices.

Since its founding in 1962, Keefe has focused on research, underwriting, and merger advisory work for the commercial banking business.

The relatively small firm has $163.5 million of equity capital, ranking 79th, according to the Securities Industry Association, just ahead of SunTrust Equitable Securities Corp. But the firm has carved a niche covering over 200 banks, thrifts, and specialty finance firms.

In recent years the firm has boomed as its investment bankers were able to get an increasingly big slice of the bank merger pie.

The firm's revenues more than doubled from $66.3 million in 1995 to $143.9 million in 1997, according to the IPO prospectus. The firm posted return on equity of 34.3% for 1997.

Keefe Bruyette advised on more bank mergers than any other investment bank in 1997, according to Sheshunoff Information Services, and merger advisory revenues were $48.9 million in the first half of 1998, 472% more than the year-earlier period.

In the past three years Keefe Bruyette has made significant inroads advising bigger companies that traditionally have called on Wall Street's bulge-bracket firms. For example, Keefe's M&A group advised First Commerce Corp. in its $3.5 billion sale to Banc One Corp. last year, and First Commercial Corp. in its $2.7 billion sale to Regions Financial Corp. this year.

But merger advisory business has evaporated at virtually every investment bank since the market started to fall in mid-July.

The people who appear to have the most to lose by Keefe Bruyette's shelving of its IPO are vice chairmen Charles H. Lott, 68, and Stanley T. Wells, 56. Both were expected to retire shortly after the IPO. Now they may only be able to cash in their equity at book value.

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