Breaking with a decades-old policy of sticking to its own Big Apple backyard, Republic New York Corp. is expanding across the United States and abroad.

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"We're looking at acquisitions in California and Florida, and we've let the investment bankers know," says Jeffrey Keil, president and chief executive of the $41 billion-asset bank. New Jersey, he adds, "is definitely a natural extension" for Republic.

Republic already has a beach-head in Florida and California. It runs seven branches in the Sunshine State under the name Safra Republic Bank, with $500 million in assets.

It also has a $2 billion-asset Miami subsidiary, set up under the Edge Act, which does business with non-U.S. residents.

In California, it runs Republic Bank California, an Encino-based institution with $500 million in assets that was acquired last year from Republic's major shareholder and honorary chairman, Edmond Safra. Mr. Safra holds 28.4% of Republic New York Corp.'s stock.

At the same time, Republic has obtained approval to set up a subsidiary bank with $100 million of capital that will take deposits and target middle-market lending and private banking in Mexico.

It has applied for a banking license in Brazil, and has acquired Mase Westpac, a major gold bullion bank in London. Meanwhile, Republic expanded its existing Canadian operation by acquiring Bank Leumi's subsidiary in Toronto last year.

Republic already has an international connection through Safra Republic Holdings SA, a Genevabased private bank with $12 billion of assets in which it holds a 48.8% stake. It also has close business relations with Brazil's Banco Safra, which is owned by relatives of Edmond Safra.

The bank also runs a subsidiary in Montevideo, Uruguay, as well as branches or representative offices in Argentina, Chile, Mexico, Venezuela, and Brazil.

It recently profited heavily from wide spreads in Mexico and Brazil on lending to wholesale money markets. Not surprisingly, it hopes to earn more.

"The corporation is positioning itself to benefit from improving economic trends, principally in Latin America...and has increased the level of its activities in the financial markets of both Mexico and Brazil," the bank said recently.

This might raise some eyebrows, given that banks, including Republic, extricated themselves from billions of dollars in bad loans to Latin America only a few years ago.

But bankers, as well as analysts, are convinced that Republic knows what it's doing. The high returns, they say, more than justify the diminishing risks in lending to expanding Latin economies.

"We are encouraged by Republic's recent start-ups of additional high-growth entrepreneurial 'seed' businesses in both Mexico and Brazil," notes CS First Boston analyst Thomas Hanley.

"We expect that this Latin American entry will be additive to earnings relatively quickly, while also making a significant longerterm contribution to the bottom line," he said.

In an equally important shift in strategy, Republic is adding domestic private asset management to its other primary lines of business: institutional, retail, and international private banking.

The goal, Mr. Keil says, "is to add a fourth leg to the bank's existing three."

All this may seems like a lot for an ultraconservative bank that is best known for its "better a small profit than a large loss" philosophy.

So far, the credo has paid off handsomely. For the third quarter of this year, Republic posted a record 18% increase in earnings, to $91.4 million, despite a sharp drop in trading revenues.

Net earnings for the most recent nine months rose 13.3% to $250.6 million, from $221.3 million in the year-earlier period, mainly as a result of lower provisions and higher net interest income.

Even if Republic's 15% return on average equity and 0.73% return on average assets are well below the industry average, analysts still view it as a bank that turns in steady earnings and low risks.

"ROA and ROE remain low, but they're still not as volatile as a lot of other banks," says Mark Gross, a senior vice president and analyst with IBCA Inc., the New York-based bank rating agency. "There's something to be said for that."

"Return on assets will rise, and return on common equity is low, but there is room for that number to grow," says Judah Kraushaar, a bank analyst with Merrill Lynch & Co. "What you have is a stock trading near book value with an exceptionally low-risk balance sheet," he says.

"Even if there's still only a nominal return on risk, that's still worth a lot more than companies that take a lot of bigger risks."

Nonetheless, Republic has come to something of a crossroads. For one thing, although it would like to expand in the New York City metropolitan region, it hasn't found the going easy.

Two bids over the last few years for large local savings banks, Crossland Federal Savings and Greenpoint Savings Bank, failed.

Retail business at its existing branches isn't growing fast enough to keep pace with the 15% to 20% growth in its international private banking and institutional businesses.

Meanwhile, ambitious plans to develop securities underwriting and distribution through a section 20 company, Republic New York Securities, was scaled back this year after management had second thoughts about investing large amounts in what looked to be a rather uncertain, long-term payback.

Mr. Keil downplays the cutback in the securities unit that led to the departure of Peter Cohen, former chairman of Shearson Lehman.

"We felt it didn't make sense to have a securities company trying to do 15 different things at the same time," he says.

Had it been just another one of Republic's commercial banking units, rather than a flashy securities company, he adds, hardly anyone would have paid attention to the reduction in plans.

Mr. Keil also does not rule out the possibility that Republic might yet grow by putting in another bid for Crossland or by acquiring some of the smaller remaining banks in the New York metropolitan area.

But he admits that slow growth in the retail banking business has forced Republic to look elsewhere for additional earnings.

"Savings among individuals are not growing, and that's particularly true of New York," Mr. Keil observes. "This business does not grow in and of itself."

Republic executives are also worried that increasing competition from nonbank financial services companies and foreign banks for deposits and financial investments will make life harder in the future.

"Competition isn't just bank to bank anymore," says Walter Weiner, Republic's chairman.

He and Mr. Keil note that brokerage and insurance companies are now actively competing for deposits.

They predict that a major French or German bank could also launch or acquire a retail bank in the United States, following the example of Marine Midland Banks Inc., National Westminster Bank, and European American Bank.

To get an edge on what they see as a tougher fight for business coming down the pike, Republic's management is looking to expand its networks domestically and internationally.

Although its new U.S. private banking business is just being launched this month, Republic already has $3.5 billion in assets under management.

And in a break from what executives say is mostly in-house asset management at other banks, Republic will farm out assets to specialized fund managers.

"We don't intend to become stock pickers or have specialized researchers," Mr. Keil says. "What we will do is help a client pick his portfolio and then pick a manager."

Mr. Keil says he regrets that the stock market has yet to appreciate the bank's efforts, but remains philosophical about Republic's stock price, which was stuck recently at about $44, just above its 52-week low.

"We've worked hard to enhance the book value of the company," he notes. "I have no doubt that over the long term, that will be recognized."

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