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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 and ultimately extend its reach to Washington, D.C. The 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. “As we expand outside of our natural footprint, cities like Washington would make sense,” says John McWeeney, who heads FleetBoston’s professional-services lending group. The new group’s clients include a dozen firms with offices in the District, including Nixon Peabody, Ropes & Gray, Hale and Dorr, and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo. Those firms could give FleetBoston an entree into the D.C. metropolitan legal scene, says Jean Manthorne, a senior vice president in FleetBoston’s professional services lending group. “We recognize the significance of the legal market in Washington,” says Manthorne. But McWeeney acknowledges that his bank faces a formidable rival in the world of law firm lending. “Citigroup has been in this for a long time,” says McWeeney. “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, which has a 25-lawyer D.C. outpost. 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 displaying any concern about Fleet’s moves. Danilo DiPietro, head of the law firm group at Citigroup Private Bank, says only that Citigroup 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 the Wachovia Corp. (just merged with the 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,” adding that Wachovia will probably be the first to make inroads in the D.C. area since the Charlotte, N.C.-based bank already has a significant presence in the area and lends to a number of Washington law firms. Providence, R.I.-based Citizens Bank has yet to break into the Washington legal market. The bank now offers loans to law firms in seven states throughout the Northeast and has its sights set on the District and other cities on the Eastern seaboard, says Christopher Ritchie, senior vice president of Citizens’ professionals banking group. The competition in fact may be global. Barclays Bank, a leading lender to law firms in Great Britain, is setting up in a permanent New York office this month a legal finance specialist who will serve law firms nationwide. 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 reporter at The American Lawyer. Legal Times reporter Lily Henning contributed to this report.

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