Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, June 26, 1993                   TAG: 9306260077
SECTION: BUSINESS                    PAGE: A-4   EDITION: METRO 
SOURCE: DIRK BEVERIDGE ASSOCIATED PRESS
DATELINE: EDINBURGH, SCOTLAND                                LENGTH: Medium

AS NEW ENGLAND BANKS FAIL, THRIFTY SCOTS PICK THEM UP

The Royal Bank of Scotland has been sifting through the wreckage of New England's banking sector, acquiring failed and troubled banks that lost millions on commercial property developers who crashed when the 1980s boom went bust.

For many foreign banks, the Northeastern United States was a mine field. But Royal chief executive George Mathewson sees a potential gold mine as his bank diversifies away from the struggling British economy.

Perhaps thrifty New England is the perfect place for a thrifty Scottish banker to set up shop?

"We have a feel for New England," Mathewson said in an interview. "I think California, for example - people say everybody's mad there."

The Royal moved into New England when most bankers were about to get hammered by the recession. It acquired Citizens Financial Group of Providence, R.I., for $440 million in 1988, and has seen profits there every year since.

The most recent deal came May 21. Connecticut banking regulators closed New England Savings Bank, of New London, Conn. The FDIC seized the bank and paid Citizens $48.9 million to take the whole thing, bad loans and all.

A month earlier, Citizens agreed to pay $95 million for Boston Five Bancorp Inc., which the Royal will shore up with $100 million in fresh capital.

Meanwhile, the Royal wants Citizens to make another one or two similar acquisitions and has been looking at some 35 banks that may be up for grabs.

Some banking analysts call the strategy brilliant, some call it stupid and others say they'll wait to see whether it works.

The Royal is quick to point out it's done better than big English rivals, notably National Westminster Bancorp and Barclays Bank, which lost hundreds of millions of dollars in North America when the commercial real estate market collapsed.

The key was buying a bank, Citizens, that stayed afloat when competitors didn't.

"I think they were smart and lucky," said Stanley Wells, executive vice president at Keefe, Bruyette and Woods, an investment banking firm that closely tracks New England commercial banks.

Others have their doubts about the Royal's shopping spree.

One analyst said owning a bank in America is little more than a status symbol - like parking a Ferrari in the driveway - that offers little return to shareholders.

"Their definition of success is everybody else lost bucket loads of money and they didn't," said Julian Robins, a banking analyst with Barclays de Zoete Wedd, the London brokerage owned by Barclays. "You could have put your money in the U.K. bonds and made more money."