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Who's your banker?Commercial Appeal, The (Memphis, TN) Date: June 5, 2005 The changing face of Memphis banking wears an eager-to-please smile. Down south of the smile, though, elbows are flying as banks large and small, locally owned and out-of-town controlled, jostle for market share in these unprecedented times. "By our count, we saw six different banks with a presence in Memphis all get acquired within roughly six months of each other," Kevin Reynolds, local analyst for Stanford Financial Group, says. "Not only does it mean there are some challenges for those institutions, there are some challenges - and opportunities - as well for others should there be any disruption." National Bank of Commerce has become SunTrust Bank and Union Planters is becoming Regions, meaning the No. 2 and 3 banks in the market have out-of-town owners after more than a century each of independence. Meanwhile, market leader First Tennessee and an array of small banks are poised for a shot at billions of dollars in deposits that could be in play. For every Phyllis Denzler, who says, "I get something, I like to stick with it, unless something real bad happens," there could be a Shirley Hughey vowing a change. Denzler, 72, of Bartlett has had a checking account with Union Planters and a CD with NBC. So far she has found no reason to switch. And, anyway, it's not like a Macy's shopper jumping to Dillard's because of the price of a blouse: "It's too much trouble," she says of changing banks. But Hughey, 67, of Southaven says she'll leave SunTrust after some 30 years with NBC. "I said, 'I'm just a little fish in this bank. But you get a lot of us little fish mad at you ..., ' " Hughey says, frustrated by customer service and her difficulty in receiving a statement. "We've been going around to the different banks and talking to them and just feeling them out." 'Local' hits home Up to 20 percent of customers leave their banks after mergers, according to estimates. Let's do the math: NBC and UP had about $9 billion combined in local deposits, according to a June 2004 FDIC report, so nearly $2 billion could be at stake - meaning many, many customers for the big, merged banks to coddle, and for others to woo. "Our opinion is that there's nothing more localized than banking," says William J. 'Will' Chase, chief executive officer of Memphis's newest bank-in-organization, which is unnamed and expects to open no later than January. Chase's words are as much salvo as sales pitch, but SunTrust and Regions say the other banks ought to beware. The big, merged banks forecast growth, and are not a little feisty in saying so. "These people can sit around and they can have all their meetings to talk about how they're going to try to take our customers," says David Popwell, president and CEO of SunTrust Bank, Memphis. "While they're having those meetings, we're out calling on their customers." Ask Popwell about his bank not being "local," and he'll tell you not only where he and his top lieutenants grew up, but where they went to high school - Christian Brothers, Melrose, MUS, Craigmont, St. Agnes. ... Ask him about changes, and he'll tell you they're for the better. "SunTrust makes about 20 percent of its bottom line from something called 'business banking,' " he says. "Those are businesses that have $5 million in revenue or less. So it's your veterinarian, it's your dentist, your liquor store, your dry cleaners. NBC historically was not aggressive in those lines of business." Similarly, Levon Mathews, regional president of Regions Bank in Memphis, talks of his bank having more to offer in its new guise. For example, there are the services of Memphis-based brokerage firm Morgan Keegan, which Regions bought in 2000. Mathews says the growing ranks of small institutions have an opportunity, true, but seizing on it depends on the big, merged banks bungling their changeovers. If that doesn't happen, he says, some small banks will struggle. "Small banks, they don't have the products and services, in terms of the breadth and depth, and they play on the emotion of the customer that being big is bad, that being out of town is bad - 'Do you know who your banker is?' I've heard that." Service, not size Big banks are flexing their bulked-up muscles. Small banks are touting their independence. And all of them wondering how it will shake out, who will be the winners and losers in a bustling market with more than 50 financial institutions. "It'll be interesting to see what happens, what it looks like a year or 18 months out," says Chuck Newell, Mid-South Market president for First Tennessee. First Tennessee stands above them all, with a nearly 38 percent market share, more than UP and NBC combined. As for locally owned banks, the next largest after First Tennessee are Independent Bank, with 1.44 percent of the market, and Bank of Bartlett at 1.31. But First Tennessee is bracing for a battle, anticipating a "runoff" of customers from the big merged banks but showing a healthy respect for the small banks' potential growth. "We know how community banks are selling themselves, and that is a good selling point," says Newell in a nod to the small banks' we-know-you-by-name boasts. "It challenges us. Consumers, for the most part, aren't extremely rate conscious. They'll go convenience and customer service. "We've got the convenience taken care of. We've got to work on the customer service, and that's where our focus is." Wisely so, it seems. "The number one reason why a person would leave a bank is bad customer service," says Tracey Mills, senior manager of public relations for the American Bankers Association. "Seventy-one percent of consumers say that's the top reason why they would switch." The 1 % solution The community bank's credo isn't just that small is better but that small is big enough. "This is a large banking market, and a successful community bank can have 2 or 3 percent of the market and be successful," says Robert Shaw, president and CEO of the new Paragon National Bank. "It's not like it's going to take a huge market-share percentage for these community banks to flourish." Chase, CEO of the new, unnamed bank-in-organization scheduled to open by January, agrees: "The deposit market in Memphis is about $18.5 billion. For us to succeed we only need to get about 1 percent." There are, of course, a lot of banks competing for those small shares of the market - 14 had market shares between a half percent and 1.5 percent, according to the FDIC's 2004 figures. Now add the startup banks to the equation. Figure also that First Tennessee, the last local giant left standing, looks to get bigger than ever. And SunTrust and Regions, new names for old players, vow growth even as the competition sees them as vulnerable. And so, as eager-to-please smiles flash and jostling elbows fly, analyst Reynolds asks a question that only time can answer: "How many banks do you need to serve the market?" - David Williams: 529-2310 MARKET SHARE 1. First Tennessee, 37.8 percent Source: Federal Deposit Insurance Corp. BANK DEALS Enterprise was bought by NBC Capital Corp. of Starkville, Miss. Note: In another sale affecting the Memphis market, Birmingham-based SouthTrust was bought by Charlotte-based Wachovia. Copyright, The Commercial Appeal, Memphis, TN. Used with permission. Caption: Illustration by Richard Robbins |
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