Smith Barney Inc.'s financial institutions practice is on the move - literally.
The firm is moving from its midtown Manhattan offices to the former headquarters of Shearson Lehman Brothers, which was acquired last year by Smith Barney's parent, the Travelers Group.
The move to Tribeca, a neighborhood on the outskirts of the financial district, is an apt symbol of the effort by the firm's financial institution team to enter the elite of Wall Street investment banking. While Smith Barney has made great strides, it is still on the fringes - both figuratively and geographically.
Eighteen months since legendary investment banker Robert F. Greenhill arrived at Smith Barney with the declaration he would turn the company into the world's leading investment bank, the financial institutions team has made progress wooing banks and other financial institutions to use the house's multifaceted services.
The addition of Shearson Lehman Brothers - Lehman Brothers was spun off - gave Smith Barney a retail brokerage matched only by Merrill Lynch.
From debt and equity distribution to research, Smith Barney offers an array of financial products geared to banks.
Its advisory services in the field of credit cards, mortgage banking, and bank technology have won it an impressive clientele.
The one glaring omission is a highly regarded bank mergers and acquisitions team.
Straddling this suddenly powerful practice is John C. "Hans" Morris.
Mr. Morris has been with the company since 1980, and in the last few years has seen a wave of Wall Street pros break down Smith Barney's doors as it embarked on a strategy of leveraging Shearson's impressive retail network and Mr. Greenhill's global reputation.
Mr. Morris' boss, Robert Lessin, who is vice chairman and director of investment banking, came with Mr. Greenhill from Morgan Stanley & Co.
"What we have been able to demonstrate to the banks is because of our much more important role as distributors for equity and debt products, we have been able to significantly increase the dialogue and the number of products we can do for them," Mr. Morris said in a recent interview.
"Because of our increased efficacy as a distributor, we have been able to initiate some transactions which in part rely on distribution," he added.
Has the strategy helped the firm build its bank clientele? The answer depends on whom you ask.
The firm so far has been "Insignificant," scoffed one leading Wall Street bank M&A adviser. Smith Barney has had a few mortgage bank and investment management clients, he said, but overall it is not much of factor, he said.
Of course, even this adviser admitted that could change.
It was the distribution that persuaded MacAndrew & Forbes to bring in Smith Barney on the purchase of First Nationwide Bank, the largest thrift acquisition in history.
And Signet Banking Corp. chose Smith Barney as one of three co-managers to oversee the spinoff of its credit card operation, Capital One Financial Corp.
Earlier this year, Smith Barney added a capital markets desk, a central component of any investment bank. This desk communicates directly with clients, acting as link with the investment bank.
Merrill Lynch, for example, has 150 people on its desk, roughly lO of whom are exclusively focused on banks. Their job is to pitch market ideas to banks, and thus forge the relationships that eventually lead to lucrative assigmnents.
Smith Barney now has roughly 20 people on its desk, with four assigned to banks.
Through Nov. 7 Smith Barney was tied with Lehman Brothers as the leading underwriter of subordinated bank debt, calculated using both lead and co-managed assignments.
Using only lead assignments, Smith Barney drops to sixth place and only two deals.
Still, Smith Barney has clearly earned the respect of banks.
"I have every confidence they could be co-manager on one of our debt deals", one treasurer of a major U.S. bank said.
Just three years ago Smith Barney was a boutique, selling highly specialized debt. Now it is a respectable debt force, several bank treasurers agreed.
And Smith Barney has also emerged as a leading market maker for over-the-counter bank stocks.
The firm advised PNC Bank Corp. on its acquisition of Blackrock Financial Management, and Chase Manhattan Corp. on its purchase of American Residential Mortgage.
Nonetheless, there have been no major bank-buys-bank assignments.
Except for Charles Nathan, the former director of financial institutions M&A at Merrill Lynch, Smith Barney has not lured any big names from other firms.
Mr. Morris says that Smith Barney already is the leading adviser to niche businesses like credit cards, and is making forays into other areas, like banking technology.
Last month, for example, Smith Barney advised First Data Corp. in its $680 million acquisition of Card Establishment Services, a payment processor.
Where Smith Barney hopes to make its big splash in bank M&A, Mr. Morris said, is on high-profile deals.
He said Mr. Greenhill is close to such bank CEOs as J. Carter Bacot of Bank of New York and Terrence Murray of Fleet Financial Group - naming a pair of companies that have long been rumored merger partners.
Mr. Morris believes that Mr. Greenhill's vision is nearly complete.
"A lot of changes have happened since Greenhill came," he said. "I thought we were doing some things well before, but it clearly is a major, major difference since we acquired Shearson and Bob and his whole team got on board."Headed for Success? 1989 Financial Institutions team formed.March '93 Smith Barney parent Primerica acquires Shearson Lehman BrothersJune '93 Robert F. Greenhill, investment banking star, is hiredMarch '94 Capital Markets desk startedAug '94 Advises Chase Manhattan on $340 million acquisition of American Residential Holdings