Andrew Wolf had a feeling that doughnuts would change things for his employer, BB&T Corp.

In April, when an initial public offering by Krispy Kreme Doughnuts Inc. took Wall Street by storm, Mr. Wolf, an equity analyst for BB&T Capital Markets, got a taste of celebrity. The Winston-Salem, N.C., banking company was one of four managing underwriters on the offering. While tech stocks tumbled, Krispy Kreme shares nearly tripled. By September everyone was calling it a dream stock.

BB&T, a $56.7-billion asset banking company known for its retail and commercial lending operations was not an obvious choice as fourth underwriter for the prominent IPO, led by Deutsche Banc Alex. Brown and J.P. Morgan Securities.

Just as Chase Manhattan Corp., FleetBoston Financial Corp., Citigroup, and other big banks fight for the highest-profile deals, many second- and third-tier companies like BB&T are finding their own opportunities on Wall Street.

Many are also seeking high-profile deals. "I wanted us to be in the Krispy Kreme deal so much because it would raise our visibility," Mr. Wolf said.

But the fear that their middle-market corporate customers with increasingly sophisticated financial needs will run to traditional Wall Street sources is what has driven regional banks into the business.

"We could see that our clients had equity needs and debt and structure needs that we weren't able to satisfy" with lending products, said Rufus Yates, senior vice president and manager of corporate banking for BB&T. "The clients were going to consume those services from somebody."

Like the biggest banking companies, regional banks are expanding into stock underwriting and mergers and acquisitions advisory services in order to match their corporate clients' needs. Many are doing so through acquisitions. BB&T bought Richmond, Va.,-based Scott & Stringfellow Inc. in March 1999. The company, with 840 employees, was renamed BB&T Capital Markets.

In the last three years many banks have completed similar deals: U.S. Bancorp bought Piper Jaffray Cos., KeyCorp acquired McDonald & Co. Investments, Wachovia Corp. bought Interstate/Johnson Lane, and SunTrust Banks Inc. bought Equitable Securities Corp. Earlier this week, $11 billion-asset Webster Financial Corp. in Waterbury, Conn., agreed to take a 65% stake in Chicago's Duff & Phelps, which specializes in M&A advisory services and private placements.

"Many corporate clients are quite comfortable having both a commercial banker and an investment banking relationship," said Andrew Duff, president and chief executive officer for U.S. Bancorp Piper Jaffray. "We see emerging some demand to bring them together."

Mark Fitzgibbon, an analyst at Sandler O'Neill & Partners, said banks are growing more aggressive in attempting to meet this demand. "It could be potentially massive," he said. "There's a tremendous amount of opportunity with the increased financing and capital markets needs of middle-market companies and the second-tier banks are just beginning to mine that opportunity."

Earlier this year $16.2-billion asset Hibernia Corp. completed its purchase of Southcoast Capital LLC, a 40-employee New Orleans investment bank specializing in mid-market companies in the Gulf Coast.

Hibernia said Southcoast brings it mergers advisory and public equity experience that complements the venture capital business it started in 1995. Within the next five years, Hibernia officials said, the company aims to boost the contribution of fees to total commercial banking revenues from approximately 25% to 50%.

Hibernia executives said the acquisition was necessary for it to keep up with its customers. "We have been a leading middle-market commercial bank in Louisiana forever," said its president and chief executive officer, Stephen Hansel. "That was not an environment where you could shrink back by becoming a commercial boutique."

Hibernia executives said that its corporate customers often fall below the radar of first-tier companies such as Bank of America Corp., Wachovia, and SunTrust.

"Because those banks are so much bigger than we are, our clients have largely been ignored, and so they welcome us coming in and exposing them - in many cases for the first time - to a lot of these products and services," said Randy Howard, Hibernia's chief commercial banking executive.

Summit Bancorp, of Princeton, N.J., is another bank expanding its offerings. This summer, the $39 billion-asset Summit bought the Philadelphia advisory firm Howard Lawson & Co. in a play not just for more M&A business, but to open up possibilities for debt underwriting.

"Our clients are telling us that they need this service. Many of them are looking at either a buy- or sell-side M&A kind of transaction in the next five years," Douglas Kennedy, senior executive vice president of corporate banking at Summit, said at the time of the deal. "We now would have the capacity of being able to offer a syndicated loan and raising subordinated debt. We're going to be able to not only advise, but also do the execution."

Summit, which is known for its strength in middle-market lending (it has the dominant market share in its home state) has struggled to add coveted fee income to its revenue mix. Mr. Kennedy said in an interview that having capital markets capabilities is "a necessary thing to have if you expect to compete in the future in the mid-market."

Since that interview, Summit has agreed to be acquired by FleetBoston Financial Corp., which acquired San Francisco investment bank Robertson Stephens & Co. in 1997 and now ranks among the nation's top 10 equity underwriters.

To get into the top ranks of underwriters - the race is calculated quarterly in what Wall Street calls the league tables - is not necessarily the goal of regional banks.

BB&T Capital Markets was a manager in 12 equity deals last year and is on pace for the same number in 2000, giving it less than a 1% share of the IPO market. U.S. Bancorp, by contrast, managed 98 IPOs last year and 111 so far this year, according to Thomson Financial Securities Data.

U.S. Bancorp said it aspires to a 3% equity underwriting market share by 2003 and eventually to be the No. 1 growth-company investment bank.

That would be fine with BB&T, said Steven Delaney, an executive vice president and director at Scott & Stringfellow.

"We're not trying to move up in the league tables and become a top-10 or top-15 underwriter of public equity," he said. "Our goal really would be to be viewed as the best regional investment banking/capital markets firm in the country, as opposed to being one of the biggest."

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