Old Kent Financial Corp. is stepping up its commercial lending efforts in Chicago, where the Grand Rapids, Mich., bank has a small presence.

Holding $2 billion of assets in Chicago, Old Kent is barely a blip on the radar screen, but in recent months it has hired away a 15-year veteran of the leading middle-market lender in the city, and it is seeking acquisitions to build its small-business and retail operations.

In an interview Tuesday, Old Kent chairman and chief executive officer David J. Wagner said the renewed emphasis on Chicago is just part of an overall focus on business opportunities.

"What we're really trying to do is match the resources to the opportunity," he said. "We were really undersized to capture middle-market and lower-middle-market lending, which is a very large segment of the Chicago market."

The company raided American National Corp., a unit of First Chicago NBD Corp., in February by hiring James A. Hubbard, a commercial lender, to be chief executive of Old Kent Bank Illinois. This week the company said it would hire another three vice presidents and a loan officer from the same First Chicago unit.

Mr. Hubbard said he would like to hire a dozen more lenders over the next few months. By its own estimates, Old Kent has about 4% market share for loans to midsize businesses. Mr. Hubbard said he would like to double that share over the next two years.

Mr. Wagner said Old Kent has long kept its eye on the Chicago market for potential acquisitions.

"We have in the past and continue to look at attractive candidates in the Chicago area," he said. However, "if we can't create accretion right out of the box or shortly after, we just won't do it."

That's important, observers said, because Old Kent is an attractive takeover candidate itself.

"They have to be real careful they don't stumble," said one investment banker, "because they're one of the top three or four targets in the Midwest."

The $13.4 billion-asset Old Kent built its business on strong commercial lending in western Michigan. Mr. Wagner hopes the team assembled in Chicago can have the type of success Old Kent has enjoyed in its home state.

"We think Chicago is a terrific market," he said. "Recently, we made the decision to invest in corporate banking in the marketplace."

But the commercial bank is only one part of Old Kent's growth strategy. Mr. Wagner said the company will continue to grow its mortgage banking business nationally and its investment management business regionally.

Robert Warrington, senior executive vice president in charge of both areas, said Old Kent's mortgage business will originate $6 billion in loans this year. The company, located in 22 states, has made several small acquisitions this year, buying pieces of other companies' mortgage businesses. This year Old Kent has made such acquisitions in Washington, Hartford, Conn., Savannah, Ga., and Houston.

Mr. Wagner noted that the company has also been exiting businesses with subpar returns. In the second quarter, Old Kent sold its $266 million credit card portfolio to First National Bank of Omaha, which will continue to market to Old Kent customers. Mr. Wagner said the credit card business had not earned a profit for Old Kent in two years.

The sale of the credit card portfolio netted Old Kent $10.6 million after taxes and helped it report a 41% jump in quarterly earnings to $53 million. Earnings per share of $1.10 included 22 cents from the gain of the sale. Stripping out the gain, the company missed analysts' estimates by a penny.

Mr. Wagner has a goal of consistently earning a return on equity above 18%. Old Kent earned 20.85% on equity in the second quarter, aided by the credit card sale, while first quarter return on equity was 16.14%. Old Kent can meet its goals without any large-scale cost-cutting program, he said.

Mr. Wagner said he doesn't mind that his company is one of the most attractive potential bank takeover targets in the Midwest. "I'll be disappointed if we're not rumored and not on everyone's list," he said. "It will mean we're not performing."

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