Boston is no longer part of State Street.

With its shareholders' approval last week to drop the city from its name, the former State Street Boston Corp. set in motion a multimillion- dollar campaign to transform the company image.

The challenge is formidable, said F. Gregory Ahern, the $31.5 billion- asset company's senior vice president of marketing and point man in the bank's branding campaign.

It plans to spend $10 million a year on marketing and advertising to expand on its longtime reputation as a regional bank with an expertise in asset custody.

State Street wants to be perceived as a global player.

At the same time, the bank wants to be known as a one-stop shop for institutional investors, providing custody, asset management, and capital markets services, Mr. Ahern said.

"We will have a competitive advantage through brand awareness," said Mr. Ahern. "Being able to communicate our focus on institutional clients in a comprehensive fashion is a tremendous opportunity."

Branding strategies have taken on high priorities at large banks that want to play for keeps in a diversifying and consolidating financial services industry.

This month Chase Manhattan Corp. embarked on a yearlong advertising campaign to insert its name and identity into the minds of consumers. Citicorp, long considered a master of image-building, is launching a renewed branding effort this year, capitalizing on its "the Citi never sleeps" slogan.

"Bankers are waking up to the corporate brand as what will drive customer loyalty," said James Cerruti, senior vice president of Diefenbach Elkins, the consulting firm retained by State Street to help formulate its campaign.

Mr. Cerruti, head of the New York marketing firm's financial services practice, said it has also done branding campaigns for First Union Corp.'s capital markets group and for Bank of Montreal. He insisted that branding is not just a fad.

"Banks are trying to create new loyalties so that customers are predisposed to choose them," he said.

State Street faces a long battle overcoming market perceptions about its business, said Mr. Ahern.

With 12,800 employees and 42 offices in the United States and abroad, the 215-year-old institution has come to dominate the custody specialty. At the end of 1996, it had $2.9 trillion of assets under custody, servicing 248 mutual funds and 2,974 individual portfolios.

It ranks as the largest servicer of tax-exempt funds in master trust and master custody, with 25% of the market.

A full 72% of total revenues come from the custody business.

"Our reputation and image center on the custody business," Mr. Ahern said. "It's certainly a reputation that's deserved. But it's not really reflective of what the company has grown to be."

State Street also has an asset management unit-State Street Global Advisors-that has $292 billion of assets under management, contributing 10% of revenues.

Its commercial bank, which makes loans in New England, contributes the remaining revenues.

State Street's strong presence in custody-it counts only Bank of New York Co. and Chase Manhattan Corp. as serious rivals-is growing faster overseas. Assets under custody abroad have grown 31% annually since 1991.

Analysts said State Street's international adventures have only begun. "Their global businesses will continue to grow and outstrip growth in domestic markets," said Thomas Theurkauf, an analyst at Keefe, Bruyette & Woods Securities Corp.

Further evidence of overseas potential came last week when State Street attributed much of its 16% growth in first-quarter income, to a record $86 million, to business outside the United States.

Mr. Ahern said top management decided two years ago that a branding campaign was needed to help peddle the bank's asset management and capital markets services around the world.

Focus groups of institutional clients both at home and abroad indicated that the corporate image was, at best, murky.

"We surveyed our customers and found that perceptions were very fragmented," said Mr. Ahern. "Our businesses were not clearly tied together in their minds."

The research effort led to the conclusion that there is strong equity in the State Street name, but that "Boston" could be sacrificed.

"Boston was redundant," said Mr. Ahern, adding that foreign customers did not relate to the New England city as they do to financial capitals like New York and London.

The next step was altering the company's familiar clipper ship logo and adding a tag line that read "Serving institutional investors worldwide."

Diefenbach Elkins, which also considered a modern abstract drawing for the new logo, commissioned an artist to redraw State Street's clipper ship to make it a "stronger image," said Mr. Cerruti. The firm went so far as to get an opinion from the Boston maritime museum on the drawing's historical accuracy.

"There are a lot of ship logos in financial services," said Mr. Cerruti. "We wanted this one to be the authentic one."

Embodied in the name change and tag line, the branding campaign represents an effort by top management to redirect State Street's business.

Speaking at the annual shareholders' meeting April 16, State Street chairman Marshall Carter said: "The tag line may be new, but the focus on institutional investors stems from our long-term strategy and reflects the direction we've been moving in for years."

Senior managers, including Mr. Carter, are now traveling throughout Europe, Asia, and North America, talking up the branding campaign.

Mr. Carter is traveling this month to client meetings in Hong Kong, Tokyo, Australia, Germany, and Switzerland to drive home the message. Mr. Ahern said the effort will show that branding is less of a cosmetic tactic than an exercise in relationship building.

"Our core base is institutional customers, money management, and capital markets," said Mr. Ahern. "To compete in the consolidating industry, brand is an important element. You have to get to market early."

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