In contrast to the small and medium-size hanks, the giants of the banking industry have been slow to discover the entrepreneurial market, and their belated attempts to crack it have met with mixed results. And so it is perhaps only to be expected that some of them would take the next logical step, namely, acquire the customer base and expertise of successful smaller banks.
That is precisely what Japan's huge Mitsui Bank Ltd. had in mind when it purchased Leonard Weil's Manufacturers of Los Angeles for $174 million in 1981. Other major banks, including Bank of Boston Corp. and First Chicago Corp., have also acquired smaller entrepreneur-oriented banks in recent years.
According to Tsuneo Ikeda, a senior executive vice-president at Mitsui Manufacturers Bank, the trend has its roots in changes that have swept the international credit markets during the past decade. Large multinational corporations, such as Toyota Motor Corp. and General Motors Corp., once the prime customers of the giant banks, have increasingly shifted to nonbank sources of capital, notably the equity markets. "This means the big banks need to develop new markets," observes Ikeda, who helped negotiate Mitsui's purchase of Manufacturers. "We need to learn how to develop relationships with the middle-market companies."
Toward that end, Mitsui insisted that, as a condition of the purchase, Leonard Weil stay at the bank for at least five years. During this period, several top young managers from Mitsui are working at Manufacturers, learning from Weil and his team of loan officers the secrets of successful middle-market banking. Eventually, they plan to apply Weil's methods in Japan
The $36-billion First Chicago Corp. had similar designs when it struck a deal to purchase, for $275 million, American National Bank and Trust Co. of Chicago, whose assets now total $32 billion. For 50 years, American National has specialized in serving middle-market companies with annual revenues in the $5-million-to-$100-million range. Like Mitsui, First Chicago plans to grant its new subsidiary considerable operational autonomy, letting American National continue to do what it already does better than its parent.
"I would argue that a large bank's approach to the lower end of the market will be at odds with the culture of the bank," says American National chairman Michael E. Tobin. "The path of success is divergent. The way you make it at a big bank is to get the big accounts, not the middle or small ones. Here you don't make it by serving the Fortune 500 or Fortune 1,000."
That fact notwithstanding, many major banks still believe that they can adapt their own organizations to serve the middle market. In California, for example, both First Interstate Bank of California and Bank of America NT & SA have recently started setting up special business banking centers, staffed with officers trained in dealing with small and middle-market companies. One of the most successful of these operations is Bank of America's San Jose regional corporate-banking group, which has tried to replicate the personalized approach to banking practiced by the successful smaller banks. Targeting high-technology growth companies in the $5-million-to-$30-million range, it numbers among its customers such companies as Linear Technology, Synapse Computer, and Scientific Micro Systems.
With the San Jose operation as a model, Bank of America senior vice-president Allen Sanborn is now developing a network of such centers throughout California. The bank plans to staff these centers with its brightest young MBAs. But no matter how bright they may be, they will have their work cut out for them. After all, they will be competing against smaller banks adept at working the lower end of the market, the foundation upon which Amadeo Peter Giannini himself built Bank of America. Admits Sanborn: "We have frankly gotten out of playing weight."