Bankers Trust New York Corp. has suffered another high-level defection, losing managing director L. Bram Smith to Morgan Stanley & Co.

Mr. Smith will lead the fledgling origination, syndication, and bank loan trading efforts at Morgan Stanley, mirroring his responsibilities at Bankers Trust, where he worked for 18 years.

His departure is a blow to Bankers Trust, which is under new management and trying to bounce back from problems in its derivatives business.

Mr. Smith's move also represents further progress in investment banks' foray onto syndicated lending turf once dominated by commercial banks.

With Mr. Smith's arrival, Morgan Stanley follows other investment banks, such as Goldman, Sachs & Co., Merrill Lynch & Co., and CS First Boston, in developing loan syndication businesses and staffing them with commercial banking executives.

Indeed, just last week, Bankers Trust lost another loan syndicator to an investment bank when Justin Vorwerk joined Goldman.

"Bram Smith's departure is bad news for Bankers Trust," said Raphael Soifer, a bank analyst at Brown Brothers Harriman & Co. "He's a very good man with an excellent reputation in the industry."

Mr. Soifer said that Bankers Trust has been losing executives because of small bonuses following a bad year for the bank. Bonuses are not expected to grow in the next year as the bank changes its business mix under new chief executive Frank Newman.

"I expect Bankers Trust to do something about compensation to hold people of the caliber of Bram Smith during this period of transition," Mr. Soifer said. He added that Bankers Trust's young, talented staff gives it "plenty of bench strength."

Bankers Trust has named 43-year old Kevin F. Sullivan, a founding member of the syndications group, to head the syndications, trading, and distribution operation.

For Morgan Stanley, the addition of the proven professional will give the start-up group credibility among investors and issuers. Analysts said that Morgan Stanley had been slow to enter the field, in part because it hadn't immediately landed an established executive to lead the group.

According to market sources, Chad Leat, the head of Chase Manhattan Bank's loan syndication team, was offered the job after the merger of Chase and Chemical Banking Corp. was announced. But Mr. Leat is said to have received a more lucrative counteroffer from the new Chase.

As for Mr. Smith, the move takes him from an established lending group at a beleaguered institution to a start-up operation at a stable company.

"His business card will look a whole lot better next week than it did this week," said T. Lee Pomeroy, a consultant with the executive search firm Egon Zehnder International.

Some said that the next likely investment bank to start a lending operation is Donaldson, Lufkin & Jenrette. "We're in the process of raising a fund," said Paul Thompson 3d, a managing director at the Wall Street firm. "Obviously we need some people to run it."

Investment banks claim they pose a competitive threat to money-centers, because regional banks will prefer to join in syndicates led by investment banks.

Participants in loans hope to provide other services to the borrowers, investment bankers say. The investment banks claim the money-centers tend to compete with the regionals on services like cash management.

"Regional banks are supportive of Merrill's loan activities both as a new source of deals and as a complementary partner to provide solutions for large and complex financings," said John F. Yang, a director in the loan syndicate group at Merrill Lynch.

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