Kenneth Alexander Keith, merchant banker and industrialist: born Castle Acre, Norfolk 30 August 1916; partner, Philip Hill & Partners 1946-48, director 1948-51, managing director 1951; managing director, Philip Hill Higginson & Co 1951-59; managing director, Philip Hill Higginson Erlanger 1959-62, chairman 1962-65; deputy chairman and chief executive, Hill Samuel 1965-80, group chairman 1970-80; Kt 1969; chairman and chief executive, Rolls-Royce 1972-80; vice-chairman, BEA 1964-71; vice-chairman, Beecham Group 1970-87, chairman 1986-87; created 1980 Baron Keith of Castleacre; chairman, STC 1985-89; married 1946 Lady Ariel Baird (died 2003; one son, one daughter; marriage dissolved 1958), 1962 Nancy Hayward (née Gross, died 1990; marriage dissolved 1972), 1973 Marie Hanbury (née Dennistoun-Webster, died 2001), 2002 Penelope de Laszlo (née Steele); died King's Lynn, Norfolk 1 September 2004.

Kenneth Keith was for three decades one of the most dynamic and influential merchant bankers in the City of London. He and Sigmund Warburg were virtually the only revolutionaries in the City of London in the two decades after 1945, both insisting on hard work and professionalism rather than the gentlemanly, amateur networking otherwise universal in the financial community.

But the two were totally dissimilar: the refugee Warburg was the brilliant, rather neurotic, descendant of generations of distinguished bankers; Keith was utterly English, tall, immaculate, impressive, apparently the very model of an English gentleman. But they had in common a disdain for the idleness and incompetence of the old City and a legitimate desire to take a leading place in Britain's financial system. Moreover, Warburg was a workaholic, while Keith, although spurning orthodoxy in his business life, seemingly aspired to a "City-type" life style, taking on all the appurtenances of the typical gentlemanly City figure, joining clubs as exclusive as White's and naming farming, shooting and golf as his hobbies.

As with so many men of his generation, it was his wartime service which provided Kenneth Keith with a preliminary boost to his career. Educated at Rugby School, Keith then trained as a chartered accountant with Peat Marwick and was a 23-year-old chartered accountant when war broke out. As an officer in the Welsh Guards, he ended the war a lieutenant-colonel, mentioned in despatches, his contribution as a staff officer in France and Germany recognised by the award of the Croix de Guerre with Silver Star.

After a year spent in the Political Intelligence Department of the Foreign Office - in a sense a continuation of his work as a staff officer - he joined the financial firm of Philip Hill. The eponymous founder had died during the war and when Keith joined, the firm was being run by a reassuring but not dynamic figure, Herbert Meredith. Hill's firm was one of the breed of "West End finance houses" so-called because they were usually based in Mayfair - Philip Hill's offices were in St James Street.

They were best known for promoting the issues of shares in new companies not necessarily of the highest repute - although at least one, Beecham, became an international success (Keith was a director for nearly 40 years, ending as chairman in the mid-1980s). Not surprisingly, the likes of Hill were deeply distrusted in the City - indeed, Hill himself had been particularly disliked by Montagu Norman, the all- powerful Governor of the Bank of England between the wars.

Luckily for Keith, as a prisoner of war he had become very friendly with Brian (later Sir Brian) Mountain, the heir apparent to the Eagle Star insurance company, where he became a director in 1955. As soon as he joined Philip Hill, the young Keith was looking round for new companies to float, after Meredith had been persuaded to step aside by Sir John Gilmour of the stockbrokers Sebag's - an act which ensured a sense of gratitude, reflected in considerable commission income, from Keith.

From the beginning, Keith wanted to expand. As an internal memorandum of the period recorded, the firm's "major objective" was to transform the small, by no means totally reputable firm into one of "the leading financial institutions in the City". This was to be achieved not by venturing alone into the City but, preferably, by purchase.

The first step came in June 1950 when a merger was announced between Hill and the reputable but totally unprofitable firm of Higginson & Co. Within two years the combined concern was installed in the City and Keith was clearly in charge. Not surprisingly, it was the much more gentlemanly figure of Lt-Col the Hon George Akers-Douglas of Higginson's who was sent to explain the policy of the new firm to the Governor of the Bank of England, Lord Cobbold. Like his predecessor, Cobbold made clear his disapproval of the sort of companies promoted by Philip Hill, but this did not deter Keith.

During the 1950s, Keith made his mark as an unrepentantly unconventional banker - by the City's narrow contemporary standards anyway - aggressive, eager to form relationships with ambitious companies like Beecham's, and Arnold (later Lord) Weinstock, for whom Keith acted in GEC's bid for AEI. While researching his book An Anatomy of Britain (1962), Anthony Sampson found Keith "a tough, casual, feet-on-the-desk banker with swept-back grey hair and a brisk way of talking".

More importantly, he had recruited professionals, accountants and lawyers to form an aggressive, well-qualified firm unlike any other in the City at the time, except SG Warburg. Both banks, as David Kynaston put it in The City of London: a club no more(2000), "on the basis of hard work, merit and aggression, were making a sustained, less-than-welcome challenge to the established order".

If this made them unpopular, Keith for one didn't mind. "He would never," says Kynaston, "perhaps not to his deepest dismay, be everyone's cup of tea." Moreover, and notably unlike Warburg, a devoted enemy of size for size's sake, he was aiming to create the biggest and most diversified financial institution in the City - not surprisingly a merger of the two banks suggested in Keith in the late 1960s came to nothing.

But Keith needed a further takeover to propel his firm - nominally at least - into the heart of the City establishment. He had already had his "bills" accepted at the "finest rate". This meant that the Bank of England was, albeit reluctantly, prepared to accept that his credit was as good as any of its peers. Then, in 1958, he organised a takeover (no nonsense about a merger this time) with the highly reputable firm of d'Erlanger, which was almost as moribund as Higginson's had been eight years earlier.

Nevertheless the combined firm was not big - the £2.5m which Keith paid for d'Erlanger was reckoned to be more than the firm was worth. But the purchase meant that the combined firm, clumsily called Philip Hill Higginson Erlanger, automatically took d'Erlanger's place in the Acceptance Houses Committee, the City's equivalent of the House of Lords.

By the mid-1960s Keith had been accepted, albeit reluctantly, as a member of the City's Great and Good. In 1963 he was selected as one of three spokesmen for the City in discussions as to how (or rather whether) it should get closer to the Treasury and was a supporter of Roy Jenkins, the Chancellor of the Exchequer in the difficult years following the devaluation of November 1967. He also played a characteristically personal role in the abortive discussions to create a sub-division of the National Economic Development Office for the City. This episode left the Governor of the Bank of England with the feeling that Keith was looking to create an alternative power base in the City independent of the Bank of England.

In 1965 Keith's ambition for size led to an agreed "merger" with M. Samuel, a third dozy member of the City's historic élite. Viscount Bearsted, a gentlemanly, unambitious member of the Samuel family, was appointed chairman, but Keith was obviously in charge. His contempt for tradition was shown in the firm's offices in Wood Street. Like those of Warburg's nearby they were utilitarian, indeed ugly, with none of the trappings of traditional banks - except a butler.

But Hill Samuel's sheer size - I called it "the Whale of Wood Street" in an article at the time - was one of the reasons why Sir Leslie O'Brien, the Governor of the Bank of England, warned against any further mergers in the merchant banking community. Typically, and indeed correctly, Keith retorted by telling an interviewer that "natural forces are likely to bring about more mergers in the course of time". He could also have pointed out that the merged bank was nowhere near the size of any of the major New York investment banks.

For, not surprisingly, the merger created problems - most of the Samuel directors decamped and one of its minority shareholders, First National City of New York, was sufficiently wary of Keith's ever-growing ambitions to sell its stake. In the last half of the 1960s, Keith went on to create the City's first financial conglomerate by buying a major ship-broking group and the innovative pension and life assurance brokers Noble Lowndes. The latter was a revolutionary step, for merchant banks had hitherto steered clear of proving a full range of financial services to the ordinary investor. But Keith was always prepared to challenge the prevailing norms. In the late 1960s, he mused aloud about whether banks should be allowed to take stakes in stockbrokers, a step which had to wait a further two decades.

But in June 1970 Keith took a step too far in bidding for Metropolitan Estates & Property (MEPC), Britain's second-largest property company. The bid was obviously designed simply to increase Hill Samuel's financial firepower, for MEPC had no connection with the activities of a "financial conglomerate" however defined. Not surprisingly, MEPC's institutional shareholders blocked the bid. The City's own opposition was expressed in a letter to The Times from a leading stockbroker, James Scrimgeour, whose family firm resigned as brokers to MEPC in protest at the proposed merger.

Prophetically, he warned that "separate and individual activities would be submerged in vast corporations generally controlled at the top by a diminishing number of 'businesscrats' ". Nevertheless, Keith openly rejected the idea - current at the time - that banks should invest heavily in businesses, as was the case in continental Europe. Indeed in the mid-1970s he sharply rejected claims by the Labour government that the City did not invest enough in British businesses. In this instance he echoed the City's general (and generally untrue) line that he was "not aware of any really sensible profitable industrial endeavour which has been held back by lack of money" - though he happily led critics of boards of directors such as Vickers considered by investors to be under-performing.

Keith's final, and equally frustrated, fling as head of Hill Samuel came in 1973 when a merger was agreed with Slater Walker, the ultimate symbol of the speculators who were the kings of the market during the "Barber boom". Many of the more gullible City commentators supported the merger but the more perceptive (especially Graham Searjeant in The Sunday Times) pointed out the narrow, short-term speculative basis of Jim Slater's operations.

As a result, the shares of both banks plunged faster than those of other financial institutions in a market which was beginning a sharp decline eventually to end in the general collapse of 1974. It was soon clear that the two personalities could never work together, and Keith's announcement of the break-off of negotiations was typically blunt. It was due, it said, to "fundamental differences of work-style and personalities" - for Keith, unlike Slater, was a banker rather than a pure stock-market speculator.

Hill Samuel never really recovered from the crisis of the mid-1970s. The blame lay largely with Keith's biggest mistake in not taking seriously the Euromarkets, in which Warburg had been a leading pioneer. Keith's neglect was surprising, for he was certainly not insular, had worked closely with the French, and indeed at a conference as early as 1961 Keith had "discussed the great contribution which the City of London could make to the Common Market".

Nevertheless, as Keith himself once admitted, he did not understand the Euromarkets and did not have the right people. "Ultimately," as Kynaston pointed out, "this would be a serious weakness, for it tied the bank's fortunes too much to those of the British economy and the more domestic, stock-market-oriented part of the City."

During the 1970s, Keith became more involved in industry rather than the City, taking on the job of chairman of Rolls-Royce after it had been nationalised following its bankruptcy in 1971 - and was sufficiently highly regarded to be ennobled in 1980. He remained non-executive chairman of the bank, but that same year finally went too far even for his own board when more or less off his own bat he tried to arrange a takeover by the giant American firm of Merrill Lynch, in pursuit of his lifelong aim, the creation of a world-scale financial institution.

Not surprisingly, the bid failed. Keith left his bank - which thrashed around for years and went into a decline in the succeeding decade. Following its takeover by the Trustee Savings Bank in the wake of the October 1987 crisis, it went on a lending spree and virtually disappeared from sight.

Keith's last job, as chairman of Standard Telephone and Cables, ended messily in 1989 and he re-emerged into view only in 2002 when, at the age of 85, after the death of his third wife, he married Penelope de Laszlo, an old flame of the late Paul Getty.

Nicholas Faith