R. Charles Shufeldt doesn't have to go far to keep an eye on the competition.

From his office in the Atlanta headquarters of SunTrust Banks Inc., he can see the distinctive spire of NationsBank Corp.'s tower, as well as the local offices of First Union Corp. and Wachovia Corp., three of SunTrust's biggest competitors.

For almost three years Mr. Shufeldt, president and chief executive officer of SunTrust Capital Markets Inc., the banking company's section 20 unit, has watched as his competitors developed their corporate debt and equity underwriting operations and moved ever further into the securities business.

Now his watching days are over.

With SunTrust's acquisition of Equitable Securities Inc., announced late last month and currently awaiting Fed authorization, SunTrust Capital Markets would leap from so-called Tier 1 activities, such as underwriting municipal bonds and commercial paper, into the realm of corporate debt and equity known as Tier 2.

"We spent the last two to three years really getting the Tier 1 section 20 maximized, and we feel like we're doing a pretty good job of that right now," said Mr. Shufeldt in a recent interview.

"We had a lot of infrastructural needs we had to get behind us, and at the same time we wanted to push the envelope as far as we could as a Tier 1," he said.

Indeed, the one-man corporate finance effort begun at SunTrust in 1984 by Mr. Shufeldt, which later developed into SunTrust Capital Markets, has taken full advantage of its authorized securities powers.

Now employing more than 200 people, SunTrust Capital Markets has three main lines of business: corporate finance, municipal finance, and corporate and institutional sales. A fourth division, SunTrust Equity Partners (STEP) makes small, mezzanine-level investments, typically in firms with which SunTrust has a longstanding banking relationship.

Mr. Shufeldt came to SunTrust from the Wall Street firm Brown Brothers, Harriman & Co., where he had worked as a lender and in corporate finance since entering the firm as a graduate student in 1976.

At Brown Brothers he was "more a lender than a corporate finance guy, but since we didn't lend much money, bankers had to look for all sorts of ways to build relationships and provide services and make money. That got me into more of that corporate finance mode of thinking," he said.

SunTrust was looking for "someone who understood both sides of the business," said Mr. Shufeldt. The bank needed a person who had "an appreciation for the corporate banking effort and would work well with the corporate bankers, but who also had a slightly different enough background and experience to be able to start a corporate finance business for them."

"They hired me and let me share the treasurer's secretary and said, 'It's all yours. Go see if you can make some money at it and if it looks good, we'll keep letting you have some people,'" he said.

"You needed to bring a lot of chutzpah," he added.

"I have a lot of respect for Charlie," said Richard B. Roberts, executive vice president and treasurer of Wachovia Corp. As chairman of the ABA Securities Association, he has worked closely with Mr. Shufeldt on regulatory and industry issues.

In addition to setting high standards and being "a very disciplined individual when it comes to business practices for our industry," Mr. Roberts praised Mr. Shufeldt as "a healthy competitor."

The first notable successes Mr. Shufeldt had at SunTrust were in loan syndications. At the time the bank had been participating in syndications led by prominent players such as Bankers Trust New York Corp., J.P. Morgan & Co., and Manufacturer's Hanover Trust Co.

But when Atlanta-based Georgia Power Co., a historical client of SunTrust's, needed a new syndicated credit, "we ended up coming out of the woodwork and winning the syndication" on the deal, Mr. Shufeldt said. "The fees were much better back then than they are now, and everyone said, 'Gee, maybe it does work.' And it just went from there."

While not a global powerhouse in syndications, SunTrust Capital Markets acted as agent on $5.3 billion in loans last year, placing it second behind NationsBank Corp. among lenders to investment-grade companies in the Southeast, according to Loan Pricing Corp.

Mr. Shufeldt led the development of capabilities in not just syndications but in private placements of debt and merger and acquisition advisory services as well, all of which are still significant businesses in the corporate finance practice.

"We just got all these little balls rolling and they kept going," he said.

SunTrust Capital Partners subsequently added synthetic leasing, commercial paper, asset-backed securities, tax-exempt finance, and financial risk management services (using derivatives) to its corporate finance menu.

And while many of its competitors are reducing their activities in municipal finance, SunTrust Capital Markets is expanding its practice, especially in the three states where it does most of its business, Florida, Georgia, and Tennessee.

"Historically, it's been a money-making opportunity," said Mr. Shufeldt. "The spreads were decent enough that we could make some money at it."

The group's total muni volume was nearly $2 billion last year; it led $83.8 million.

"The problem now is, the volumes are way off, it's much more competitive, and it's much tougher to make money at it," he added.

But SunTrust's strong banking presence in local communities makes the business worthwhile. "We've got the banks in the local communities, we've got the (bank) president in those local communities, and he knows those people, and they want to do business with local banks."

"If we can ride that coattail in, it solidifies his relationship with the municipality, and if we're doing the debt underwriting, they can be pretty profitable relationships."

Although SunTrust's client relationships are managed by the corporate lenders at SunTrust Capital Markets' commercial banking affiliate, Mr. Shufeldt has focused much of his energy on forming a seamless alliance that allow the corporate bankers to function as corporate relationship managers.

Those ties were greatly strengthened between 1991 and 1995, when Mr. Shufeldt left SunTrust Capital Markets to head corporate banking at SunTrust Banks Inc. Because about 95% of the capital markets group's business is with clients of its commercial bank affiliate, making the corporate bankers aware of the group's capabilities and how to best use them for their corporate clients was his key task, said Mr. Shufeldt.

While the majority of SunTrust's corporate lenders still see themselves as commercial bankers who occasionally cross-sell capital markets products, more and more are growing comfortable with wearing "a hat that is a corporate finance hat, not a lender hat," he said.

"We want them out there acting like corporate finance relationship managers, looking for the best opportunities to serve that client's needs, bringing him ideas and solutions, and not just going out thinking, 'What I want to do is lend this guy money,'" said Mr. Shufeldt.

"That requires training and product knowledge and corporate finance knowledge, and then incentive plans and motivations that" encourage bankers to look at "the whole spectrum of potential ways that we can meet a client's need," he added.

That approach to relationship banking has found a warm reception among some of SunTrust Capital Markets' clients.

"They're a total package now," said Gaylord Coan, chief executive officer of Atlanta-based Goldkist Inc., an agricultural cooperative that has worked with SunTrust for more than 35 years.

"They're still a lender," said Mr. Coan, "but it's a total banking and capital management endeavor." In addition to lending and pension fund services, SunTrust Capital Markets has advised Goldkist on the sale of subsidiaries and managed capital markets transactions for the company, said Mr. Coan.

Thanks in large part to the Fed's recent elimination of some two dozen firewalls between section 20 firms and their bank affiliates, SunTrust Capital Markets is now preparing to add corporate debt and equity to the menu of services those bankers can offer.

The deal for Nashville-based Equitable Securities would give SunTrust the vital "one-stop-shopping" capability it needs to compete in the corporate finance marketplace.

Mr. Shufeldt will become vice chairman and head of fixed-income capital markets of the combined firm, which will be named SunTrust Equitable Securities.

"If your vision is to become a full service provider to your corporate client base, it's pretty hard to go in there and be convincing if you can't do corporate debt and equity," said Mr. Shufeldt.

"There's always that suspicion in the listener's mind that you're promoting the private placement because you can't do public debt. Is that really the best thing for me to do or are you just promoting it because you can't do public?" he said.

Losing some of the most profitable business SunTrust Capital Markets' clients have, such as public high-yield debt, has also been a key motivator in the firm's move for Tier 2 powers.

"We've got too many clients where we're the lead (bank on a credit) who need to do some nice piece of public high-yield debt, and if they're doing it now, they're doing it with someone else. I hate it," he said.

"The ugliest scenario is not only do I miss that opportunity, but because I can't do it, because I don't have equity underwriting or research, not only do we lose that piece of business but I lose the lead on the bank piece, too. That's the ultimate nightmare," said Mr. Shufeldt, but he added that such a loss had only happened once.

Integrating Equitable Securities with SunTrust Capital Markets will occupy much of the next year for Mr. Shufeldt. But by the end of 1998, he projects the firm may generate between $100 million and $150 million in noninterest income.

While the capital markets unit now represents less than 10% of its parent's noninterest income, that number could rise to as high as 25% over the next few years. But that 25% would be the upper limit, because "we're a volatile business, and SunTrust prides itself on the stability of the earnings stream and growth," said Mr. Shufeldt.

Adding the new business lines will be a challenge, acknowledged Mr. Shufeldt, but a worthwhile one.

"It's not going to be easy to make it a highly profitable contributor, but we think the client relationships we have are so strong that we've got a damn good chance of it," said Mr. Shufeldt.

"One thing I've learned is don't underestimate the opportunity that exists in your own client base," he said.

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