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Trend in Banking

Latest trend in banking: Big boys caring about little guys from bizjournals.com

While still head of the Philadelphia market for First Fidelity Bancorporation, Roland K. Bullard II last year was discussing the stiff competition for the banking business of the region's middle-market companies when he offered an aside about the future.

The real war would be for the small-business customer, said Bullard, who has since retired. And community banks, long the only truly loyal financial providers for small business, would find themselves hopelessly outmatched by the spending power, technological might and product depth of the big banks and their nonbank competitors, Bullard suggested.

How vivid was his crystal ball.

Long an afterthought to most big banks, small businesses -- for these purposes those companies with less than $5 million in annual sales -- are now being smothered by their attention. In the Philadelphia area, the big banks are creating new divisions to cater exclusively to small-business customers and stealing talent from the competition to help do that. They are creating computer-based products for small businesses, scaled down versions of those available to large corporations for years. Some are even publishing special newsletters for small businesses and arranging self-help seminars for them.

They are even blitzing small businesses. One day last month, PNC Bank NA dispatched more than 70 bankers to call on hundreds of small businesses throughout Philadelphia and the surrounding suburbs to show them what the $70 billion-asset bank from Pittsburgh can do for them.

Meanwhile, high above all that street-level scrapping, Merrill Lynch & Co. Inc. is trying to attract small-business customers with its dignified offices on the 29th floor of One Liberty Place and its storied reputation for financial planning and investment acumen.

A $25,000 loan to help a widget maker buy a new machine to make more widgets faster, once considered by the big financial institutions to be more trouble to process and assess in terms of credit risk than it was worth, is now the kind of deal that would be chased by not only small banks like the Bank of Gloucester County, Royal Bank of Pennsylvania and Main Line Bank, but also PNC, CoreStates Bank NA, Mellon PSFS, First Union National Bank, Merrill Lynch and GE Capital Mortgage Corp.

LENDING INCREASES

According to the U.S. Small Business Administration, a recent study showed that the number of commercial loans of less than $250,000 had increased by 8.9 percent from 1994 to last year. Small businesses contribute 47 percent of all sales in the nation, employ more than half of the private work force and create two out of every three new jobs, according to the SBA.

And so, with a change in attitude, new technology and promises of speedy responses to loan requests, the Philadelphia market's financial players are giving it their all to attract the banking business of the boat- trailer dealers, independent family practitioners, audio/visual retailers and the like.

"I think it's more competitive than it's ever been," said Joseph J. Flynn, recently lured away from CoreStates to serve as senior vice president of business banking for PNC. Flynn had been part of Meridian Bank's Delaware Valley Business Banking Group prior to Meridian's merger with CoreStates.

One recent afternoon, Flynn was helping colleague Barbara Laurenzi show off a new product for small businesses, BusinessExpress/PC. The software "brings the bank to about its most convenient location ever -- right inside your office," according to one of PNC's marketing brochures. With BusinessExpress/PC, a small business owner can check account balances, determine what checks have cleared, transfer funds from a personal computer and more -- without ever going to the bank. Additional features are expected to debut early next year, such as accessibility to line-of-credit account information. The software fee for BusinessExpress/PC will be $75, but is being offered through the end of the year for $37.50. There are also reporting and transaction initiation fees.

AUTOMATION VS. ATTENTION

With this emphasis on developing products that make it unnecessary to go to the bank, banks run the risk of alienating themselves from small-business customers -- generally a group that seeks personal attention and won't think twice about switching to another bank for a better rate or more efficient service.

That is partly why PNC has restructured its business banking operation this year, establishing it as a separate line of business, Flynn said. In the Philadelphia market, that means six banking representatives that are responsible for working with the branches to ensure that each is familiar with the small business products PNC offers and the needs of each of the branches' small business customers. Each branch manager is responsible for handling commercial loan requests up to $250,000. Anything above that is the responsibility of one of 15 designated business bankers. Through those business bankers, business banking reps and branch managers, PNC hopes to provide some of the personal touch that the computerized processes of the more mundane banking procedures will eliminate, Flynn said

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