A veteran bank stock investor is turning up the heat in his quest to get Chicago's St. Paul Bancorp to put itself up for sale.

Harry V. Keefe Jr., who oversees two hedge funds that hold 3% of St. Paul stock, is sending a letter to all 6,000 St. Paul shareholders this week urging them to directly contact the board of directors to push for a sale.

Shares could fetch between $27 and $35 in an open sale, Mr. Keefe contended. St Paul shares closed at $23.8125, off 6.25 cents for the day.

To expedite shareholders' communication efforts, Mr. Keefe included in his letter to investors the names, addresses, and telephone numbers of all 10 directors.

Mr. Keefe, among the best-known figures in bank investing circles, launched his drive in late November, asking shareholders to push for a sale at the thrift's annual meeting in May.

Board members say they are aware of Mr. Keefe's overtures.

"We get mail from Mr. Keefe all the time," said Sister Jean C. Murray, a board member and Roman Catholic nun. "The directors have talked about this and decided not to make any public comments."

Privately, board members say they are leaning toward management's position for continued independence. "Essentially we believe they have a good plan," said one director who declined to be named. "Given time they should reach their goals."

St. Paul expects to generate increased revenues through a recently purchased banking company, a new mortgage operation, and a cost-cutting drive, a spokesman said.

Return on equity that is now 11% will be increased to 15% by yearend 2000, the St. Paul officer added.

In a formal statement, the company said, "We and our advisers are confidant that our business plan will result in superior returns to shareholders over the long-term.

"One of our shareholders apparently has a very short-term perspective, and that is contrary to our approach," the response noted.

But Mr. Keefe maintains that a sale now is in everyone's best interest. The move would "eliminate the downside risk that St. Paul-with its stagnant operating earnings and meager return on equity-will continue to flounder in a world of increasing competition," he said in his letter.

In an interview, Mr. Keefe said that he feared competition from the megabanks now operating in the area.

"We don't want St. Paul to be a community bank making the loans that BankAmerica and Bank One won't make," he said. "Those loans will be garbage."

Mr. Keefe said he plans to follow-up with a formal request for the thrift's sale at the directors' annual meeting in May. Until then "I plan to keep the heat under the kettle," he asserted.

The salvos were exchanged as broader markets were giving up some gains they had posted in recent days.

BankAmerica Corp. dropped $3, to $66.9375; Citigroup was off $1.75, to $56; and J.P. Morgan & Co., shed $2,625, to $111.8125.

The Standard & Poor's bank index fell 2.88% and the Dow Jones industrial average 1.51%. The Nasdaq bank index dipped 1.02% and the S&P 500 1.93%.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.