New bank is rare island of stability in sea of turmoil


January 27, 1991|By Thomas Easton | Thomas Easton,New York Bureau of The Sun

NEW YORK — Consider it among the rarest specimens in the increasingly harsh world of finance: a new bank that is solvent, growing and stable.

It is called OFFITBANK, after its chief executive, Morris Offit, a Baltimore native who, among numerous other professional and philanthropic activities, is chairman of the board of the Johns Hopkins University.

Though a financier's name adorns the stationery, this isn't a bank in the style of J. P. Morgan & Co. or Mellon. Rather, Mr. Offit said using his name (rather than the more staid original idea, Investment Management International) was suggested by a member of the Swiss branch of the Rothschild family and that the intention is Rothschildesque -- to build an unusual hybrid investment firm targeted to an elite, affluent crowd.

Not every financial institution, of course, can aspire to be a behemoth, and given the state of most of the large U.S. banks and brokerage firms, who would want to? Bad loans for real estate, leverage buyouts and so forth have undermined the standard banking business of taking money from one set of clients and lending it to another. That won't be a part of OFFITBANK, Mr. Offit said.

Instead, Mr. Offit took a private investment firm he founded in 1983 and pushed it through an expensive regulatory maze last July to transform it into a bank. It was the first time such a conversion had been done, he contends. The reason he did it: Despite the numerous headlines about banking disasters, some benefits apparently still come with the territory, though they aren't obvious to the typical bank client stranded in a teller line.

OFFITBANK will make loans, but the loans will be secured by client holdings in securities and will be made only for specific investment purposes. Deposits will be accepted in time, perhaps, to be placed in other currencies in other countries. Five-percent passbook accounts aren't likely.

Most of the money handled by the firm will be directly invested in the worldwide public securities market, mostly in top-flight bonds. The firm will live or die based on how effectively it plays the global shifts in interest rates and currency values.

Needless to say, that's hardly a simple task at the moment. But Mr. Offit is sanguine, at least about the investment implications. For some time, he said, he has believed that interest rates will decline, "probably dramatically," that the dollar will be weak and that the gulf crisis won't have other long-term implications. When hostilities broke out, "we didn't do anything," Mr. Offit said, and there are no new plans to change course.

OFFITBANK has capital of about $10 million -- a statistically insignificant amount for any of the larger U.S. banks. Moreover, if a bank isn't devoted to taking deposits, there's little need for bricks and mortar. Currently, all 46 of OFFITBANK's employees fit comfortably into a spacious suite on a single floor of a new midtown skyscraper.

Still, by certain measures, OFFITBANK is no slouch, and it might be structured to expand meaningfully. It manages $2.7 billion in assets for investment, making it one of the country's 10 largest independenttrust banks, and $1 billion of that is in overseas bonds, putting it among an even smaller coterie of major international investors.

Clients number 170, ranging from individuals with $5 million to invest to large institutions including the Baltimore Symphony Orchestra, Columbia University, Jewish Theological Seminary and Corning Inc.

Expanding the assets under management is the kind of growth that matters, since money management and trust operations receive feesbased on a percentage of the total sum. In 1983, when the predecessor firm started, there were three employees and only $30 million under management. Given the ninetyfold increase in size in nine years, business would appear to be good. For the record, Mr. Offit says his new bank "is thriving."

Some sort of endorsement of the strategy by OFFITBANK's shareholders appears to be implicit. Included are two commercial banks, Mercantile Bankshares and Chase Manhattan Bank; an investment bank, Wertheim Schroder; and another money-management firm for the affluent, Pitcairn Financial Trust.

Raising money for a new financial firm is almost impossible at the moment, but Mr. Offit appears to be an exception because of his unusually long and successful earlier career. Brought up in Baltimore, he attended local public schools and then Johns Hopkins University with which he continues to be closely involved.

After receiving a business degree at the University of Pennsylvania's Wharton School, he returned to Baltimore as a junior financial analyst at Mercantile Bankshares, ultimately running the research department.

In 1968, he joined Salomon Brothers, then known for its bond operations, and established a stock research department that is now ranks among the finest, and broadest, in the world.

In 1980 he left to become an entrepreneur, first heading the U.S. investment operations of Julius Baer Group, a venerable Zurich bank, then striking out on his own in 1983.

The newest phase, OFFITBANK was under consideration for years, and the most controversial decision so far may have been labeling it with his own name. "I am teased about it all the time," said Mr. Offit. "But clients like the fact you can't hide. When your name is on the door they think you are held to a higher standard."

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