Ahead Of The Pack

How some banks are prospering under deregulation

 

With the U.S. financial-services industry in the throes of deregulation, bankers everywhere have been brushing away the cobwebs and looking for new ways to attract and keep customers. They have to; there isn't a change that all of the nation's 14,000-odd commercial banks can survive, let alone flourish, in an era of nationwide banking and blistering competition from "nonbanks" like Sears Financial Network. Some, however, will do very well -- and the following, bankers and industry analysts say, are likely to be among them.

Morgan Guaranty Trust Co. of New York. J. P. Morgan, the legendary financier, may have said it best when he was asked in the 1930s to describe his distinctive approach to banking: "We do a first-class business in a first-class way." The bank's role in history on both sides of the Atlantic is testimony to its clout. Among its accomplishments: it played an important role in financing the Union side in the Civil War; it bailed out the U.S. Treasury during an 1894 run on gold; and it acted as purchasing agent for the French and British governments during World War I.

Today, the $68-billion (assets) Morgan bank, head-quartered at the corner of Broad and Wall Streets in New York City, is as powerful and as well respected as ever. Instead of pushing credit cards and other retail loans, as other big banks have done, it has focused entirely on the needs of governments, the Fortune 100, and wealthy individuals (minimum balance for checking accounts: $5,000). It also continues to take a leading role in the banking industry. In 1984, for example, it played a pivotal part in the rescue of Continental Illinois Bank.

The industry may be changing, but Morgan's focus isn't -- for very clear reasons. Its customers are fiercely loyal, and its per-employee earnings are around three times those of other large banks.

The Bank of New Haven. An aggressive young bank that tells most people to stay away sounds like a contradiction in terms. But to Joseph Ciaburri, the 55-year-old president and chief executive officer of The Bank of New Haven ($115 million in assets), it makes perfect sense. Since he founded the bank six years ago, he has been aiming all of his marketing artillery at one niche: small business. And the strategy has been a big success. Today, says Ciaburri, "We have 1,700 customers, ranging from ma-and-pa's to companies with sales of $40 million." In 1984, the Connecticut bank had earned an average of 1.49% on its assets over a five-year period, placing it above most of its peers.

Decorated in an old-style manner, the bank is modeled after Morgan in more ways than one. In particular, it provides a level of attention and service unequaled by its local competitors, staying open one hour later and handling some transactions in private offices rather than at teller windows. "There is a bit of snobbery," Ciaburri concedes. "The customer is more than king. And as long as I'm president, we won't have any of those automated teller machines."

Wachovia Bank & Trust. Some years ago, the late Robert Hanes, then president of Winston-Salem, N.C.-based Wachovia, preached a radically new gospel of banking to a crop of young hires. Bankers, he declared, could no longer afford to define themselves as clerks. In the new age, they needed to get closer to their customers, solve their problems, and sell them services.

Hanes's vision has paid off. Wachovia (pronounced wa-KO-vee-ah) has $8.8 billion in assets and 209 branches in North Carolina. It is an outstanding money-maker and, like Morgan, is regularly named by U.S. bankers as one of the best-managed institutions in the country. Much of what Wachovia does is standard fare among regional banks, but its unusually well-trained staff seems to handle the details better and more consistently than its competitors. "A lot of what we do isn't the sort of thing you can write ads about," admits a senior officer, "but our customers expect us to do the little things right. So we do."

State Bank of Cross Plains. Ten miles west of Madison, Wis., is an unlikely place for the headquarters of a shrewd financial services firm. But State Bank of Cross Plains, with $44 million in assets, is offering its customers a lot more than you'd expect from a small suburban bank.In one trip to the bank, a patron can invest money in an individual retirement account; buy property, casualty, and life insurance; get advice on personal financial planning; or do business with a travel agency located in the bank building and affiliated with the bank. This year, for the first time, customers will also be able to hire the bank to prepare their tax forms.

Helped along by such services, the bank has been extremely profitable; it earned 1.46% on assets in 1984. Its employees and directors, moreover, own half the stock. "Our goal," says executive vice-president Lee Swanson, "is to maintain and increase our customer base. And we're doing it."