
DATE: Sunday, September 7, 1997             TAG: 9709030651

SECTION: BUSINESS                PAGE: D8   EDITION: FINAL 

TYPE: HAMPTON ROADS ALMANAC '97

SOURCE: BY TOM SHEAN, STAFF WRITER

                                            LENGTH:  141 lines

FINANCEAS BANKING AND SECURITIES INDUSTRIES CONSOLIDATE, SOME WONDER IF THE MARRIAGE IS MADE IN HEAVEN. BANKS CONTINUE TO BUY INTO SECURITIES

With a torrent of money flowing into the stock market, stockbrokers routinely ask themselves how much higher the Dow Jones industrial average and other market indicators can climb.

Some brokers also are asking how they'll fit into an industry that is quickly consolidating.

The Glass Steagall Act - the Depression-era barrier that once separated gathering deposits and making loans from underwriting and trading securities - has all but disappeared.

In recent years, many banks have nibbled around the edges of the securities industry by setting up brokerage operations, offering their own mutual funds and launching investment banking departments. But several are sweeping into the securities industry by acquiring entire firms.

Bankers Trust New York has purchased Alex Brown & Sons, a well-regarded investment banking firm that specializes in technology firms. In June, BankAmerica Corp. agreed to buy Robertson Stephens. A few weeks later, NationsBank Corp. arranged to buy Montgomery Securities, a Robertson Stephens rival.

Meanwhile, BB&T Corp. of Winston-Salem, N.C., is in the process of buying a small investment banking firm in Richmond, Craigie Inc.

Last month, First Union Corp. attracted the attention of stockbrokers with an agreement to buy Wheat First Butcher Singer Inc. Based in Richmond, Wheat First has 1,053 brokers in 19 states, including 71 brokers in Hampton Roads.

By acquiring Wheat First, it could meet more of the needs of those corporate customers seeking to issue stock, First Union said. Wheat First said it agreed to be acquired because it lacked the investment banking resources essential to thrive in future years.

A First Union-Wheat First combination should work well because the two companies know each other and their geographic markets overlap, said Merrill Ross, an analyst with the investment banking firm Friedman Billings Ramsey in Arlington.

The industry consolidation hasn't been limited to banks with fat checkbooks. In an unusual combination of corporate cultures, investment bankers Morgan Stanley Group Inc. merged in May with Dean Witter, Discover & Co. Known for its stuffiness, Morgan Stanley has a giant money-management unit and a brokerage network that spans the world. The operations of Dean Witter Discover include a brokerage firm and a large credit-card issuer.

At the local level, the merger has benefited Dean Witter's brokers by providing them with a broader menu of investment services to sell, said Matthew J. Maloney, vice president and manager of Dean Witter's office in Virginia Beach.

Because several expansion-minded banks have plenty of capital, some stockbrokers in Hampton Roads say they expect more securities firms to be bought by banks. However, these brokers wonder whether the acquirers will have the stamina to weather a sustained downturn in the stock market and reduced earnings from their securities subsidiaries.

``This business is very cyclical,'' said the Norfolk manager of a nationwide brokerage firm. ``Do banks have the guts to hang in there? I think they'll be quicker to pull the trigger and close branches because this isn't their core business.'' MEMO: BUSINESS ALMANAC ILLUSTRATION: Photo

IAN MARTIN/The Virginian-Pilot

A Centura Bank customer...

Graphics

BROKERAGE FIRMS

Number of offices, brokers and employees in Hampton Roads:

Anderson & Strudwick Inc., headquarters: Richmond; local offices:

1 (Norfolk); number of brokers: 11; employees: 15''

Davenport & Co., headquarters: Richmond; local offices: 4

(Virginia Beach, Newport News, Williamsburg, Gloucester); number of

brokers: 37; employees: 52; Dean Witter Reynolds Inc., headquarters:

New York; local offices: 2 (Virginia Beach, Newport News); number of

brokers: 29; employees: 39

A.G. Edwards & Sons Inc., headquarters: St. Louis; local offices:

1 (Norfolk); number of brokers: 27; employees: 39

Interstate/Johnson Lane, headquarters: Charlotte; local offices:

1 (Virginia Beach); number of brokers: 7; employees: 9

Edward Jones, headquarters: St. Louis; local offices: 14

(Virginia Beach, Norfolk, Chesapeake, Suffolk, Smithfield, Franklin,

Newport News, Poquoson, Yorktown); number of brokers: 14; employees:

Legg Mason Wood Walker, headquarters: Baltimore; local offices: 2

(Norfolk, Newport News); number of brokers: 21; employees: 38

Merrill Lynch & Co., headquarters: New York; local offices: 4

(Norfolk, Virginia Beach, Hampton, Williamsburg); number of brokers:

75; employees: 109

Olde Discount Stockbrokers, headquarters: Detroit; local offices:

2 (Virginia Beach); number of brokers: 12; employees: 12

PaineWebber, headquarters: New York; local offices: 2 (Norfolk,

Virginia Beach); number of brokers: 45; employees: 79

Prudential Securities Inc., headquarters: New York; local

offices: 1 (Virginia Beach); number of brokers: 23; employees: 33

Quick & Reilly Inc., headquarters: Palm Beach, Fla.; local

offices: 1 (Norfolk); number of brokers: 3; employees: 3

Charles Schwab & Co., headquarters: San Francisco; local offices:

1 (Norfolk); number of brokers: 7; employees: 7

Scott & Stringfellow Inc., headquarters: Richmond; local offices:

4 (Norfolk, Virginia Beach, Chesapeake, Williamsburg); number of

brokers: 33; employees: 48

Smith Barney Inc., headquarters: New York; local offices: 2

(Norfolk, Virginia Beach); number of brokers: 22; employees: 31

Wheat First Butcher Singer*, headquarters: Richmond; local

offices: 6 (Norfolk, Virginia Beach, Newport News, Hampton,

Williamsburg, Franklin); number of brokers: 71; employees: 123

* Agreed in August to be acquired by the Charlotte-based banking

company First Union Corp. The transaction is scheduled to be

completed late this year.

NEW INTEREST SPARKS FLURRY OF OFFERINGS

Investor appetites for new stocks has fueled a burst of public

offerings this year, including two this year by Hampton Roads-based

companies.

Metro Information Services Inc. of Virginia Beach raised $33.3

million in January from an initial public offering of 2.3 million

common shares. The Virginia Beach-based software development and

consulting company said it planned to use the proceeds to repay

debt, to finance acquisitions and for general corporate purposes.

In August, the tax-preparation service Jackson Hewitt Inc. raised

$25.8 million from the sale of 1.32 million common shares. Virginia

Beach-based Jackson Hewitt said it would use the funds to reduce its

reliance on borrowed money, to expand its network of tax-preparation

offices and for general corporate purposes.

Despite the favorable environment for raising capital in the

stock market, the roster of local companies with publicly traded

shares has been reduced in recent years by mergers.

The latest involved International Family Entertainment Inc., the

Virginia Beach-based parent of the Family Channel. On Aug. 1,

International Family Entertainment was acquired for $1.9 billion in

cash and assumed debt by Fox Kids Worldwide Inc., a joint venture of

News Corp. and Saban Entertainment.

The Virginian-Pilot

PUBLICLY TRADED COMPANIES IN HAMPTON ROADS

[For complete graphic, please see microfilm]

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