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NEW YORK — There’s nothing like a bad economy to cool law firms’ borrowing habits. Yet that trend hasn’t stopped banks from competing more aggressively. The overall leader in lending to law firms has long been Citigroup Inc. Now it appears that a regional competitor is angling to get into the national game. FleetBoston Financial Corp., already a strong lending presence in Boston, Philadelphia and other cities in the East, launched a major professional-services lending group in January, with teams in New York, Boston, and Morristown, N.J. “Citigroup has been in this for a long time,” says John McWeeney, head of Fleet’s new lending group. “But I think there’s an opportunity for Fleet to enter this market in a specialized way.” Fleet is doing that by raiding some of New York’s most experienced bankers in the legal sector. Its roster now includes Glenn Crisafi (formerly of Citigroup) and William Blackford (formerly of J.P. Morgan Chase & Co.). Apparently the new strategy has already begun to pay off. Take last year’s creation of Bingham McCutchen. Boston’s Bingham Dana already banked with Fleet, but San Francisco-based McCutchen, Doyle, Brown & Enersen was a Citigroup customer. The merged firm does business with both banks — but Fleet ended up with Bingham McCutchen’s credit line. Bingham’s chairman Jay Zimmerman likes Fleet’s approach: “I think that what Fleet has done — and obviously they are looking to compete effectively in the marketplace — is gather a group of professionals who understand the issues facing law firms, who can look at banking issues in the context of the overall business. It sounds simple, but not everybody does it.” (Of course it doesn’t hurt that both banks are Bingham clients.) Citigroup isn’t revealing any concern about Fleet’s moves. Danilo DiPietro, head of the law firm group at Citigroup Private Bank, says only that Citi doesn’t see major changes “on a national level,” though he adds, “We have very stiff competition regionally.” Indeed it does. William Brennan, a consultant at Altman Weil Inc., points to recent efforts in the Northeast by Citizens Bank, Commerce Bancorp Inc., and Wachovia Corp. (just merged with First Union Corp.) as evidence that even more banks are zeroing in on the legal lending market. “They’ve been offering some extremely attractive deals [to our clients],” Brennan says of all three banks. “Which is why we’re working with them.” None has a national presence yet in legal lending. But Brennan says that all three banks are looking to “expand their footprint.” The competition in fact may be global. Barclays Bank PLC, a leading lender to law firms in Great Britain, is setting up a legal-finance specialist in a permanent New York office starting in July. Now the main question is: How much smaller is the pie that these banks are fighting over? “We have certainly seen a moderating trend,” says DiPietro, words echoed by Zimmerman, McWeeney and Hildebrandt International’s Joel Henning. New requests for credit lines, DiPietro says, tend to be fewer and more moderate than they had been before. And firms are using their existing lines of credit less, and for shorter lengths of time. Firms are being fiscally conservative in other ways as well-pushing productivity and displaying what Fleet’s Blackford calls “a laserlike focus on expenses.” Not that that’s all bad, from a bank’s point of view. “If I put my credit quality hat on, I am pleased that debt is moderated,” says DiPietro. “If I put on my revenue generating hat, I have to come up with new ways to make money. But I’m pleased to do that.” For both Fleet and Citigroup, that involves trying to package more services more efficiently. Fleet has tied together both its private and commercial banking services to provide law firms with the equivalent of one-stop shopping: everything from the firm’s credit limit to insurance can be handled by one contact person. Citigroup, meanwhile, is creating a stronger focus on packaging individual services for firm members, including investment advice and retirement planning. Do those services, however more neatly packaged, really provide anything new? Henning doesn’t think so; he’s more impressed by a different Citigroup innovation. The bank assembles considerable data about the law firm marketplace, analyzes it, and offers it to its customers. DiPietro says that the bank creates such data for itself first — but “it’s very much a value-add for the firm. At least that’s what our clients tell us.” Competition being what it is, Fleet’s clients now get to say the same. “One of the benefits of putting together a professional-services organization is that we do have that information,” Blackford says, confirming that his bank, too, now provides this kind of consultation. How long before still more banks join in? Probably not as long as it will be before law firms relax and become big borrowers again. Amy Vincent is a staff reporter for The American Lawyer, a Recorder affiliate based in New York.

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