A veteran New York money manager is waging a campaign to push Chicago- based St. Paul Bancorp into a merger or sale.

Harry V. Keefe Jr., who manages two hedge funds that hold a total of 3% of St. Paul's stock, said he filed a shareholder resolution last week calling for a sale.

Stockholders are to vote on the proposal at their annual meeting in May.

Mr. Keefe said he took action after an unsatisfying meeting last month with Joseph C. Scully, the thrift company's chairman.

"I'm discouraged," Mr. Keefe said. St. Paul has no viable game plan for meaningful profit growth and lags in an increasingly competitive market, he added.

Mr. Keefe said the company could fetch $30 a share in a buyout, or about 2.5 times its book value. He said there would be several potential acquirers for the $6 billion-asset thrift because of its presence in the attractive Chicago market. St. Paul has 65 branches and 550 automated teller machines.

In a statement responding to Mr. Keefe's actions, Mr. Scully said, "We believe that shareholders' interests will be best served" by remaining independent. "We are optimistic about our future."

Mr. Scully noted that the company has a program in place to improve return on equity to 15%, from 11.5%, within two years. In addition to commercial banking, St. Paul plans to sell investment products and it launched a cost-cutting program that would reduce expenses annually by $14 million starting in 1999.

None of this seems to have swayed Mr. Keefe, who said he may back two candidates to run for seats on the thrift company's board.

Additionally, Mr. Keefe said he has personally talked to three bank chief executives who he claims are interested in buying St. Paul. He declined to name the companies, but observers pointed to TCF Financial Corp. of Minneapolis, which has a presence in Chicago, and Charter One Financial Corp. of Cleveland, which has said it would like to be in the city.

Buying St. Paul would also make sense for a number of regional banking companies that have a small presence in Chicago, including U.S. Bancorp, Firstar Corp., and BankAmerica Corp. The Bank of Montreal unit Harris Bankcorp of Chicago may also be interested.

Mr. Keefe had been seeking a meeting with St. Paul's management since early this year. He has been publicly critical of the company's performance, but until now had stopped short of calling for an outright sale.

The move is certain to force St. Paul into some sort of action. "It puts more pressure on management to execute their plan," said Kenneth Puglisi, an analyst with Sandler O'Neill & Partners.

Mr. Keefe's reputation on Wall Street-he founded and later sold Keefe, Bruyette & Woods Inc.-should add clout to his cause. "It helps that he's a respected bank stock investor," said Mr. Puglisi.

"I've not had one investor or one Wall Street person say I'm not doing the right thing," Mr. Keefe said.

Another St. Paul stockholder agreed with Mr. Keefe's action. "I think they should sell," said John O'Connor, director of investment research at Fort Washington Advisors Inc., Cincinnati, which holds 1% of St. Paul's stock. "It's a classic underperformer that would be better off in the hands of someone else."

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