Whether it is a changing economy, information security issues,
continuing market consolidation, or simply the sheer numbers
of bank branches opening up across the region, St. Louis bankers
are facing plenty of challenges as they enter the fourth quarter.
St. Louis Commerce chatted recently with eight banking leaders
to get a feel for how the industry is changing.
All noted that the Wachovia deal should change the landscape
considerably, although industry leaders say it’s too early to
tell what most of those changes might be. Charlotte, N.C.-based
Wachovia Corp. agreed to acquire A.G. Edwards Inc. in May for
$6.8 billion. At least this is creating more activity in the
financial-services job market, bankers note—a number of A.G.
Edwards employees have sought employment with their firms.
Perhaps the most significant feature of the St. Louis banking
industry, leaders say, is that its growth is steady. This is
both a blessing and a curse. On one hand, stability is good.
Compare our town to robust regional markets in the Southeast
or on the West Coast, where fluctuations to the downside can
be as painful as increases are exhilarating. On the other hand,
profits often take longer to realize.
Therein lies a major challenge for bankers in St. Louis: Trying
to run the ship full speed ahead in a market more accustomed
to steady as she goes.
David Kemper
Chairman, President & CEO
Commerce Bancshares Inc.
“The biggest issue facing the banking industry in St. Louis
continues to be achieving above-average earnings growth in a
market with moderate growth metrics,” Kemper says. “While St.
Louis has not been a high-growth demographic market, it has
been historically stable and well diversified, offering an attractive
climate for banking.”
Kemper says this stability has attracted large national entrants
and encouraged a record number of new bank startups, resulting
in a competitive deposit environment.
Commerce has 57 branches in the St. Louis region, an increase
of 14 from the 43 branches it had just five years ago.
“That’s not the whole story, however," Kemper says. “Commerce
not only increased the number of banking locations, but also
built seven new banking centers to replace existing locations.”
What’s more, says Kemper, assets in St. Louis at Commerce have
steadily increased over the same five-year period to $4.8 billion.
In 2002, assets were at $3.8 billion, making the growth total
a little more than 26 percent.
Wachovia’s entry into the market is an exciting development,
with more potential for good than ill, he says.
“While it is much too early to judge the results of the acquisition,
these types of events have historically provided opportunities
for local providers like Commerce to expand their customer and
employee base,” Kemper says.
Shaun Hayes
President & CEO of Missouri Banking
National City Corp.
“The good news is that we have a slow-growth economy,” Hayes
says. “The bad news is that we have a slow-growth economy.”
St. Louis is not a high-growth market as are some regions in
the Southeast or on the West Coast. Hayes says high growth is
a wonderful thing to have when times are good. However, when
times aren’t so good…
“When times slow down, there is a much deeper impact,” he says.
Regions that depend heavily on one or a few industry segments
can find themselves in a pinch when fortunes change. Any oil
town can vouch for that. One of the Gateway City’s biggest blessings
is its diverse economy.
“We’re not heavily dependent on any one industry or any one
segment of the economy. I think that is very important,” Hayes
emphasizes. “We have a nice financial-services market here.
We have a great medical market. We have manufacturing. We have
wonderful law, accounting, architectural, and engineering firms.
We’re not tied to any one industry and so the cyclical nature
of St. Louis is very positive for a bank.”
The acquisition of A.G. Edwards creates client opportunities,
Hayes says.
“We will sell more products and services to people because anytime
something changes people tend to shop. If there is some kind
of disruption they look to other providers.”
National City has had an ongoing dialogue with A.G. Edwards
employees considering a career change to commercial banking.
“The jobs in an investment bank are not the same as in a commercial
bank, but the skill sets are similar,” Hayes points out.
National City continues to expand throughout St. Louis. With
55 branches open region-wide, Hayes expects to have 70 branches
by 2008. The bank presently is fifth or sixth in the market,
he says.
“We would like to be one or two in market share in commercial
banking, retail banking and the trust business," Hayes says.
Pete Genovese
Vice Chairman and CEO St. Louis
UMB Financial Corp.
“The biggest issue facing us is that the competition in the
St. Louis market is exceedingly strong,” says Genovese, attributing
the increased competition to the arrival of Wachovia and other
new banking companies. “These guys are attempting to grow their
market share, and therefore they are raising the costs of deposits.”
Wachovia’s acquisition of A.G. Edwards has affected UMB Financial
directly, Genovese says. A.G. Edwards has been a commercial
client of the bank for around 10 years. “We’re working with
A.G. Edwards as the change takes place,” he says.
Genovese hopes any loss of commercial business will be made
up in the retail business of the bank. “From a retail standpoint
it will probably shake the trees a little bit and allow us to
go after the type of client A.G. Edwards has on the books,”
he says.
UMB has about $1.5 billion in assets in the St. Louis market,
with 25 branches. Genovese says he expects UMB’s number of branches
to stay within 25 to 30.
The cost of deposits is higher in St. Louis than any of UMB’s
markets, Genovese says.
“It’s been what I call irrational competition that is creating
the biggest problem for us in the market right now. We are basically
fighting over what is here and you are taking a pie and dividing
it up with many more players.”
Bob Witterschein
CEO and Senior Loan Officer
Southwest Bank
“Our market is heavily banked with continued competition from
existing as well as new banks,” says Witterschein. “We also
see non-bank institutions now competing for the same customers.”
Southwest currently has deposits totaling $2.8 billion in the
St. Louis region, up from $1 billion in 2004. Assets total $4.1
billion, up from $2 billion in 2004. It currently has 17 branches
and Witterschein expects to add more in the coming years. But
he points out that it’s not the company’s goal to be the Starbucks
of banking.
“We have added one or two a year, pretty consistently over the
past few years. Our goal is not to have a branch on every corner—rather
to have stellar comprehensive services at each location and
to offer value-added conveniences,” Witterschein says.
“Southwest has always thrived in St. Louis by being focused
on strong relationships with our clients—above all else, our
customers rely on Southwest Bank for our accessibility and proven
desire to help our clients succeed. I believe St. Louisans value
that local philosophy a little more than people do in other
cities.”
Sally Roth
Area President and CEO, Upper Midwest
Regions Financial Corp.
Roth says information security is one of the biggest challenges
any business faces nowadays, and it’s an especially expensive
proposition for the banking industry.
“Providing the best possible security and user-authentication
features requires a continuous and substantial investment of
capital,” Roth says.
Roth, while not disclosing the bank’s total assets for the St.
Louis region, says Regions continues to grow organically.
“We are also making our system friendlier. With each added level
of security or upgrade, we are making certain that our customers
understand what we are doing, why we are doing it and what the
benefit is for them,” she says.
Regions has 69 branches and 90 ATMs in the market.
“Serving the needs of such a diverse group requires a delivery
model that can serve the varied needs of these clients,” Roth
says. Regions has put a matrix model in place to enhance the
decision-making between lines of business and individual locations.
“This gives independent units—organized by geography—the ability
to service our customers like a large community bank, while
offering the breadth of services, convenience and scale benefits
of a much larger institution,” Roth says.
Patricia Mercurio
Missouri President
Bank of America N.A.
Mercurio says Bank of America is prepared for the onslaught
of retiring Baby Boomers.
“We offer a number of products focused on a number of market
segments—from mass market to affluent families,” Mercurio says.
This includes checking and savings accounts, credit cards, mortgages,
home equity, and student loans.
“Assisting them with retirement planning is a natural evolution
of these relationships,” she says. Bank of America has launched
a new online retirement center, divided into four life stages
that allow users to pick the right stage for them.
With 56 branches throughout the region, Bank of America aims
to continue increasing the number of its full-service banking
centers.
“We continually analyze opportunities in our markets to assess
demand,” says Mercurio, who declined to release the bank’s total
assets here. “St. Louis is a fairly fragmented banking town.”
F. Christopher McLaughlin
Executive Vice President & Director of Retail Banking
First Banks Inc.
“The biggest challenge facing the banking industry in St. Louis
is the ultra-competitive pricing and its effect on net interest
margins,” McLaughlin says.
McLaughlin doesn’t any more have a solution for the problem
than do his peers. That said, his observation is likely consistent
with those of bankers in any market nationwide with many companies
and many branches that then have to deal with the entry of another
player, or several. In this area, to name just one more new
entrant along with Wachovia, Fifth Third Bank is another presence
that’s becoming a major player.
“The St. Louis market is consistent with markets represented
by a moderate-sized metropolitan area and an expanding suburban
environment,” says McLaughlin.
First Banks is also refining its products and services to meet
the need of the Baby Boomers.
“Expansion of wealth-management services and insurance products
are just two examples of specific initiatives to serve this
large segment,” he says.
With assets of $1.4 billion in the region, First Banks has added
branches in downtown St. Louis and Dardenne Crossing since last
year. It currently operates 46 branches throughout the region.
Joseph Imbs
Regional Chairman, St. Louis Market President
U.S. Bancorp
“U.S. Bank will be in each new Schnucks store in the coming
years,” Imbs says. “Our number of checking account customers
has grown substantially in the St. Louis area this past year.”
Imbs attributes the increase to the bank’s exclusive partnership
with Schnucks supermarkets. The bank has already opened 30 branches
in Schnucks stores and placed ATMs in another 38 stores.
As regional chairman, Imbs is responsible for commercial banking
activities in Missouri, Kansas, Colorado, Wisconsin, Illinois,
Ohio, Kentucky and Tennessee.
U.S. Bank’s regional headquarters is in St. Louis, where there
are 105 branches and 300 ATMs. The company presently reports
$8.3 billion in deposits in the St. Louis market.
“St. Louis is a great market to operate in because our local
economy continues to do well by virtue of its diversity,” Imbs
observes. “It’s been very steady, and we benefit from a great
workforce with solid Midwestern values that share our commitment.”
