The name of the chairman of Bank of New York Co., J. Carter Bacot, was misspelled in Friday's Business section. (Published 1/10/88)

NEW YORK -- J. Carter Bancot, the maverick chairman of Bank of New York Co., has confirmed the rumors: Yes, it is true that managers at some of his Manhattan branches still walk a few dogs for their customers.

"But not as often as we used to," he said.

And certainly not as often as some executives at Irving Bank Corp., target of a Bancot-inspired hostile takeover attempt, might prefer.

Freed by deregulation from traditional priorities such as canine care for wealthy depositors, Bank of New York, which was founded by Alexander Hamilton in the 18th century, has thrown off its past and embarked on an aggressive expansion campaign.

That campaign is climaxing this winter as the bank readies for a showdown with rival Irving Bank Corp., parent of the Irving Trust banking unit, which dates to the 19th century. Their takeover battle, which began last September, has become the biggest unfriendly merger fight in U.S. banking history.

If the deal eventually goes through, it will create the 11th-largest bank holding company in the country.

Both sides are anxiously awaiting the Federal Reserve's opinion about the proposed combination, which could be issued as soon as the middle of this month. If the Fed gives the green light and state regulators follow suit as expected, Bank of New York plans to make a formal tender offer for Irving's shares. The next step probably would be a springtime proxy fight for control of Irving's board of directors, Bancot said in an interview.

Irving has urged the Fed to block the proposed takeover on the grounds that it would create a financially weak bank company and also might stimulate an uncontrollable round of hostile bank takeovers.

"We feel that the Fed has a major responsibility here in reviewing this proposed acquisition -- and it's more than just the combination of these two banking institutions," said Robert Falise, Irving's executive vice president and general counsel. "I think the entire industry is watching this transaction very closely to see how the Fed handles it."

The battle for control of Irving has been described by some as a shocking departure from the traditions of comity and accommodation in Manhattan's clubby, old-line banking world.

Merger specialists -- who stand to reap large fees if hostile bank takeover fights become a trend -- have sounded the alarm in recent weeks, declaring that no commercial or investment bank is now safe from expansionist raiders like Bancot.

A number of analysts disagree with that assessment, saying that if anything, bank mergers are on the wane. But others argue that if Bank of New York can overcome regulatory obstacles and volatility in the financial markets to win its fight with Irving, it will provide a shining example to others contemplating unfriendly bank takeovers.

Bancot downplays any suggestions that he is setting an important precedent. At the same time, he expresses surprise that no banking colleagues, besides those at Irving, have expressed to him any disapproval about his decision to press a hostile takeover.

The old ways, Bancot said, are passing even faster than he thought.

"If you get too happy with your clubs and your soft life, you're not going to have a soft life for too long," he said, summing up the present climate.

The battle between Bancot and Irving's chairman, Joseph A. Rice, is emblematic of the divergent strategies adopted by some banks in the deregulated environment.

"Bank of New York clearly is aggressive, very lean, very much oriented toward new industries ... whereas the Irving has been very conservative and has focused on the business it has always been doing," said Virginia Adair, a banking analyst at Merrill Lynch & Co. Inc.

Before a wave of deregulation swept through the financial services industries beginning in the 1970s, Bank of New York and Irving both possessed long, rich histories and reputations for conservative -- some said sleepy -- management styles.

Bank of New York's aggressive strategy took shape, Bancot said, when management realized "that if you wanted to be a survivor in the banking world -- and we did -- then you had to run a lot faster. And if you didn't, somebody would take you and do it for you."

That, of course, is exactly the lesson Bancot is now attempting to impress on Irving.

In the face of mounting pressure, Irving's management defends its less ambitious strategy by describing it as a model of traditional banking prudence. Irving has told the Fed that it would be a poor match for Bank of New York in part because its lending policies are more conservative than those pursued by Bancot.

Moreover, Irving told shareholders in a Dec. 28 letter that Bank of New York has fudged its accounting when describing how a combined bank company might look. Irving said that if a takeover succeeds, the new bank will be far less healthy than either bank would be if they remained independent.

"We at Irving feel that the two bank holding companies are incompatible on a lot of fronts -- management, the type of business that we do, and also on the financial side," Falise said.

Bancot, however, is unimpressed by Irving's appeal to traditional banking standards. "I don't like to be cynical about it, but is $1.9 billion in {Third World} debt good risk management?" he asked, referring to the amount of Irving's outstanding loans to developing countries. Bank of New York has eschewed Third World loans as part of its growth strategy.

Bank of New York did have to absorb the losses recently when a Florida developer defaulted on a sizable package of construction loans. Bancot described that problem as an "isolated incident" that has been corrected.

Bancot said that he hopes Fed approval of the proposed takeover will bring Irving's Rice to the negotiating table. The two men appear to have sharply contrasting personalities that reflect the opposing strategies of their banks. Bancot said they discussed a possible merger casually over a period of years before Bank of New York decided last September that only a hostile takeover would accomplish its goals.

If Irving continues its staunch resistance to Bank of New York's overtures, it may face an even tougher fight from its own shareholders. Stanley Nabi, executive vice president of Bessemer Trust Co., which owns about 4.8 percent of Irving's stock and is the second largest holder behind Bank of New York, said that Irving's shareholders have not been treated fairly by the bank's management.

"They have treated, I believe, their shareholders in this matter very shabbily," Nabi said. "They should have had an intelligent discourse with Bank of New York and an intelligent discourse with the shareholders, which they did not do."

Irving's stockholders have already lost a potential $12 per share because Bank of New York revised its offer from $80 per share to $68 after the Oct. 19 stock market collapse. Bancot said the offer could drop even more if market conditions deteriorate.

Deal-making -- friendly or unfriendly -- has become the rule, rather than the exception, in the Manhattan banking world, according to the Bank of New York chairman. "Within the whole banking world, there's a lot of dialogue going on," Bancot said. "That's part of this deregulated environment ... It's a lot more fun now."