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SIGNET CELEBRATES ITS MD. BICENTENNIAL President predicts a healthy future


Kenneth H. Trout is a man of special talents: he can see 200 years into the future and the past at the same time.

Yesterday that talent was on display as Mr. Trout, president and chief executive officer of Signet Bank/Maryland, led a celebration of Signet's 200th year in the state.

The company was founded in 1795 as the Bank of Baltimore (not to be confused with the former Savings Bank of Baltimore, now owned by First Fidelity Bancorp.). In 1929, soon after the stock market crash, the bank was acquired by the then-31-year-old Union Trust Co. of Maryland. Ten years ago, Union Trust was purchased by the Richmond-based Bank of Virginia and the name was changed to Signet Banking Corp.

"For two centuries Signet has served the Chesapeake region, from clipper ships to space shuttles, from the era of George Washington to the collapse of the Berlin Wall -- all right here, from this same plot of land at the corner of what was, in 1795, known as the corner of Market Place and St. Paul's Lane," Mr. Trout said yesterday morning at a bicentennial party held outside the Signet Tower downtown.

But up in his 19th floor office earlier, Mr. Trout was far more eager to talk about Signet's future. This is an important year for the company, not merely because of its Maryland anniversary. This is the first year Signet is operating without its credit card business, which provided almost two-thirds of its $150 million in earnings last year.

In February Signet finished spinning off to the public Capital One Financial Corp., the credit card business, now based in Falls Church, Va.

The sale raised more than $100 million in equity, but at a cost of what many thought was Signet's strongest asset. What's left is a billion banking company with operations in Virginia, Maryland and the District of Columbia. The company is too big to be a community bank, and far too small not to worry about predators in an age of rapid consolidation.

It's an awkward size, Mr. Trout acknowledged, but it shouldn't be viewed as a liability. "We don't think the key to survival is size," he said in an interview. "We think it's a multiple of your earnings" and book value.

In fact, Signet has convinced investors it can grow in a sluggish economy. Where banking stocks are trading at an average nine times earnings, Signet closed yesterday at 11.45 times estimated 1995 earnings, or $21.75 a share. That represented 1.65 times its book value, compared with less than 1.4 for banks its size.

"Signet is one of the few banks out there that appears to have earnings momentum going forward," said Vernon Plack, an analyst with Scott & Stringfellow in Richmond.

Its first-quarter earnings, released this week, reinforced that belief. The company reported a 48 percent increase in core banking earnings -- not including the credit card business -- to $26.7 million from $18.0 million a year ago.

That growth, Mr. Trout said, represents the first fruits of Signet's new information-based strategy. Borrowing from the technical and marketing expertise of Capital One, Signet has started to use telemarketing, direct mail and database analysis to find a new, national audience for its lending and deposit products.

As head of not only Signet's Maryland operations but also its overall commercial lending business, Mr. Trout is particularly interested in finding ways to target small- to mid-sized businesses. While there's a wealth of national data available on small businesses, that information begins to vanish for bigger companies that haven't yet gone public.

One way Mr. Trout hopes to fill in the data gaps is to send a cadre of consultants to potential mid-sized business customers around the country. In exchange for detailed financial data, which can then be applied to future direct mail and telemarketing campaigns, Signet will consult with these companies on their financial practices.

Today these new specialty businesses represent about $350 million in assets, compared with a $2.1 billion commercial loan portfolio. But "within five years they should be bigger than commercial lending," Mr. Trout predicted. He even sees a day when the company could give up its bricks and mortar branches entirely. "It's within the realm of possibility," Mr. Trout said. It might not even take another 200 years.

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