Fifth Third branches out; WaMu prunes
Fifth Third branches out; WaMu prunes
Slower expansion pays off for one bank; rapid growth forces cutbacks at the other
By Becky Yerak
Copyright © 2006, Chicago Tribune
Published September 15, 2006
Say this about Fifth Third Bank Chicago's Terry Zink: The chief executive doesn't miss a chance to underscore his bank's growth plans for the market.
A day after rival Washington Mutual Inc. disclosed it was closing 28 of its 172 Chicago-area branches, Zink took the opportunity to trumpet Fifth Third's plans to open about two dozen new branches by the end of 2007.
Fifth Third, which currently has 149 local offices, has consistently said that its game plan for the Chicago market consists of opening about 20 branches a year to reach its goal of about 240 locations by the end of 2010.
But when 250 banks compete in a market that has led the nation for seven of the past 10 years in the number of branch openings, it never hurts to rev up the PR machine and remind the public you're in growth mode.
"If you look on a map, the expansion will look like a shotgun blast because it's basically centered downtown and spreads out," said Zink, who joined Fifth Third in January 2005 after 17 years with Wells Fargo & Co.
Meanwhile, Washington Mutual is on a different trajectory. The Seattle-based institution said Sept. 7 that it plans to throw in the towel on 16 percent of its Chicago-area branches, most of them in Lake and McHenry counties and "outlying suburbs."
As key players in an evolving Chicago banking scene, both have much in common.
Both are recent entrants to the local market. Fifth Third debuted in 2001. WaMu entered the scene in 2003, bringing along its quirky advertising and khaki-clad concierges.
Both have installed new leaders in recent years charged with gaining market share.
WaMu ranks fourth in the number of branches, but 48th in deposit market share, at 0.30 percent as of June 2005, the latest period for which figures are available from the Federal Deposit Insurance Corp.
Fifth Third ranks fifth in market share with 3.36 percent. That's barely budged from 3.24 percent in 2004, but Fifth Third points out that of the top five banks in the area, it increased its share the most.
But there's at least one key difference in how the two approached the Chicago market.
"WaMu is one of the only financial institutions that didn't acquire someone to come into the market," points out George Morvis, CEO of Financial Shares Corp., a Hinsdale-based financial-services consulting firm. "They came in with no brand presence to speak of" and basically built from scratch.
The market share leaders--JPMorgan Chase & Co., ABN Amro Holding NV and BMO Financial Group--all made acquisitions to get here. Chase bought Bank One Corp. ABN Amro and BMO own LaSalle and Harris, respectively.
Likewise, Fifth Third inherited 88 Chicago-area branches when it bought Old Kent Financial in 2001.
Despite pruning, WaMu says it will open new branches in the area. It hasn't yet publicly named the 28 branches it will close, saying it's still contacting customers and regulators, but they're among the 80 that WaMu is closing nationwide because of poor financial performance.
Industry observers also attribute WaMu's retrenchment to a host of other factors: growing pains, tough competition, questionable advertising and bad planning, including not properly studying, for example, the population density patterns that it now cites as among the reasons for the branch closings.
"I find it interesting that they didn't take the density issues into account when they opened the branches," said one local banker who wished to remain anonymous.
WaMu's quirky advertising might not have flown in the counties from which it's retreating. McHenry and Lake "are not Bucktown or Wrigleyville," Morvis said. "If you look at their approach, it really skews toward younger customers."
Other industry watchers said a WaMu shakeout was inevitable because of its aggressive move into the market, and the pruning might not be done.
WaMu says most of the 28 closings will occur in Lake and McHenry counties, but Terry Griffin wonders whether a branch in her River Forest neighborhood is vulnerable.
"It's a new brick-and-mortar store in a Jewel lot, and I never see anybody in there," said Griffin, vice president of the Chicago area for the Community Bankers Association of Illinois. "Once in a while, I see people using the ATM, but of course they don't charge for those."
In March, WaMu sweetened its free checking program and began telling the country about it in a new national advertising campaign. It began offering new incentives, such as free checks for life, one free bounced check a year and unlimited free use of competitors' ATMs.
A WaMu Chicago spokesman said the new free checking program has been well-received and added, "The majority of our stores are very successful."
William Gooch, CEO of Community Bank of Elmhurst, recalls the days in the mid-1960s when there were only four financial institutions in his DuPage County town. Today there are 28, including two WaMu branches, in a town that hasn't grown much, he said.
Gooch believes that Fifth Third's Old Kent acquisition has helped his two-branch bank. Every time Fifth Third made a change to its customer policies, "another busload of customers would come to us," he said.
Asked about Fifth Third's service issues, Zink said its customer retention rate is about 90 percent, better than the industry average of about 80 percent.
Cincinnati-based Fifth Third plans to open six Chicago-area branches by year's end and has an additional 18 sites on the drawing board for 2007. All will be open from scratch, and the numbers don't include branches that Fifth Third might pick up through acquisitions.
By 2010, Fifth Third hopes to have area market share of 8 percent to 10 percent and triple its assets, to $30 billion.
"We'll double our size if we continue to grow organically," Zink said. "But I do think there'll be some consolidation, and I hope we'll ... grow some just through acquisition" to accomplish the asset goal.
----------
byerak@tribune.com
Slower expansion pays off for one bank; rapid growth forces cutbacks at the other
By Becky Yerak
Copyright © 2006, Chicago Tribune
Published September 15, 2006
Say this about Fifth Third Bank Chicago's Terry Zink: The chief executive doesn't miss a chance to underscore his bank's growth plans for the market.
A day after rival Washington Mutual Inc. disclosed it was closing 28 of its 172 Chicago-area branches, Zink took the opportunity to trumpet Fifth Third's plans to open about two dozen new branches by the end of 2007.
Fifth Third, which currently has 149 local offices, has consistently said that its game plan for the Chicago market consists of opening about 20 branches a year to reach its goal of about 240 locations by the end of 2010.
But when 250 banks compete in a market that has led the nation for seven of the past 10 years in the number of branch openings, it never hurts to rev up the PR machine and remind the public you're in growth mode.
"If you look on a map, the expansion will look like a shotgun blast because it's basically centered downtown and spreads out," said Zink, who joined Fifth Third in January 2005 after 17 years with Wells Fargo & Co.
Meanwhile, Washington Mutual is on a different trajectory. The Seattle-based institution said Sept. 7 that it plans to throw in the towel on 16 percent of its Chicago-area branches, most of them in Lake and McHenry counties and "outlying suburbs."
As key players in an evolving Chicago banking scene, both have much in common.
Both are recent entrants to the local market. Fifth Third debuted in 2001. WaMu entered the scene in 2003, bringing along its quirky advertising and khaki-clad concierges.
Both have installed new leaders in recent years charged with gaining market share.
WaMu ranks fourth in the number of branches, but 48th in deposit market share, at 0.30 percent as of June 2005, the latest period for which figures are available from the Federal Deposit Insurance Corp.
Fifth Third ranks fifth in market share with 3.36 percent. That's barely budged from 3.24 percent in 2004, but Fifth Third points out that of the top five banks in the area, it increased its share the most.
But there's at least one key difference in how the two approached the Chicago market.
"WaMu is one of the only financial institutions that didn't acquire someone to come into the market," points out George Morvis, CEO of Financial Shares Corp., a Hinsdale-based financial-services consulting firm. "They came in with no brand presence to speak of" and basically built from scratch.
The market share leaders--JPMorgan Chase & Co., ABN Amro Holding NV and BMO Financial Group--all made acquisitions to get here. Chase bought Bank One Corp. ABN Amro and BMO own LaSalle and Harris, respectively.
Likewise, Fifth Third inherited 88 Chicago-area branches when it bought Old Kent Financial in 2001.
Despite pruning, WaMu says it will open new branches in the area. It hasn't yet publicly named the 28 branches it will close, saying it's still contacting customers and regulators, but they're among the 80 that WaMu is closing nationwide because of poor financial performance.
Industry observers also attribute WaMu's retrenchment to a host of other factors: growing pains, tough competition, questionable advertising and bad planning, including not properly studying, for example, the population density patterns that it now cites as among the reasons for the branch closings.
"I find it interesting that they didn't take the density issues into account when they opened the branches," said one local banker who wished to remain anonymous.
WaMu's quirky advertising might not have flown in the counties from which it's retreating. McHenry and Lake "are not Bucktown or Wrigleyville," Morvis said. "If you look at their approach, it really skews toward younger customers."
Other industry watchers said a WaMu shakeout was inevitable because of its aggressive move into the market, and the pruning might not be done.
WaMu says most of the 28 closings will occur in Lake and McHenry counties, but Terry Griffin wonders whether a branch in her River Forest neighborhood is vulnerable.
"It's a new brick-and-mortar store in a Jewel lot, and I never see anybody in there," said Griffin, vice president of the Chicago area for the Community Bankers Association of Illinois. "Once in a while, I see people using the ATM, but of course they don't charge for those."
In March, WaMu sweetened its free checking program and began telling the country about it in a new national advertising campaign. It began offering new incentives, such as free checks for life, one free bounced check a year and unlimited free use of competitors' ATMs.
A WaMu Chicago spokesman said the new free checking program has been well-received and added, "The majority of our stores are very successful."
William Gooch, CEO of Community Bank of Elmhurst, recalls the days in the mid-1960s when there were only four financial institutions in his DuPage County town. Today there are 28, including two WaMu branches, in a town that hasn't grown much, he said.
Gooch believes that Fifth Third's Old Kent acquisition has helped his two-branch bank. Every time Fifth Third made a change to its customer policies, "another busload of customers would come to us," he said.
Asked about Fifth Third's service issues, Zink said its customer retention rate is about 90 percent, better than the industry average of about 80 percent.
Cincinnati-based Fifth Third plans to open six Chicago-area branches by year's end and has an additional 18 sites on the drawing board for 2007. All will be open from scratch, and the numbers don't include branches that Fifth Third might pick up through acquisitions.
By 2010, Fifth Third hopes to have area market share of 8 percent to 10 percent and triple its assets, to $30 billion.
"We'll double our size if we continue to grow organically," Zink said. "But I do think there'll be some consolidation, and I hope we'll ... grow some just through acquisition" to accomplish the asset goal.
----------
byerak@tribune.com
posted by Carlos T Mock @ 10:28 AM
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