Bank Mergers Worry Business Owners

The stock markets were disappointed on Wednesday when HSBC Holdings and Citigroup, Inc. hinted they would not acquire any United States' banks in the near future. But the announcement probably came as a relief to some small business owners.

According to a recent survey by Greenwich Associates, 30 percent of small businesses (those with annual revenues between $1 and $10 million) and 23 percent of midsize businesses (annual revenues of $10 to $500 million) said that merger rumors concerning the banks where they do business would cause them to consider reducing future levels of banking business with them. The reason generally given was an expected decline in service quality.

Among their quality concerns, 53 percent of the small businesses surveyed believed a merger would have a negative impact on their established relationship manager performance, making it the most cited area.

The area midsize companies felt would be most affected was their banks' responsiveness to information requests, with 50 percent saying they felt this area of performance would be hurt.

When Bank of America completed its acquisition of FleetBoston in April, it gained 18 million new customers, including more than 500,000 small business accounts. With that came the headache of new ATM cards, account numbers and possibly new people handling those accounts.

These inconveniences can add up and, rather than dealing with them, some businesses would rather move their business elsewhere. More than a quarter of the small business owners surveyed whose bank had gone through a merger took their business to another institution. Sixteen percent of midsize companies said they made a switch.

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