For the past 10 years, independent banks have sung the praises of the “gift that keeps on giving” – a common term that describes when a big bank acquires another bank in town and totally messes up the merger. In the 1990s, these god-awful mergers helped spur the success of mid-size players and the growth of de novo community banks. The behemoths watched their market share dribble out the back door after paying hefty premiums for local banks.
Here’s one quick example. In June 1994, Barnett Bank and NationsBank collectively held a 32 percent deposit market share in the ritzy Naples, Florida, market. Ten years later, these two institutions have merged and now do business as Bank of America, whose collective market share has been cut by a third to only 20 percent in Naples. Not exactly what I would call synergy.
These major toe stubs by the big guys were wonderful for many community bank shareholders, but they’ve also allowed some unhealthy bravado to seep in among management teams.
So here’s a news flash: the success of independent banks in the last 10 years has served to wake the sleeping giants. The big banks are truthfully getting better at execution, and this will have significant strategic implications for mid-size and small banks in the years ahead.
In the past several months, there have been several key case studies that illustrate where the big bank environment has changed:
What’s happened to the old reliable toe stub? There are several factors that have allowed big banks to be more on their game these days:
In addition, banks have moved through the rocky initial stages of customer care technologies. Now, applications such as contact management, workforce management and knowledge-based systems are starting to have a meaningful impact on retail delivery. This is especially noticeable in call centers, where big bank agents just don’t sound as stupid and robotic as they did in the past.
After the surprise attack on Pearl Harbor, the commander of the Japanese fleet, Isoroku Yamamoto, lamented, “I think we have only woken a sleeping giant.”
For the past 10 years, big banks have snored and small banks have leaped in to steal share, but now the game is changing. Even though I would not work for a big bank for all the money in the world, I still have a great deal more respect and fear for them now as competitors. Be careful out there.