Even though many competitors seek greener pastures in nonbank activities, Edward Travaglianti's European American Bank is sticking to its traditional ways.
Mr. Travaglianti, president and chief operating officer of this $6.8 billion-asset bank, has garnered four years of earnings increases as a deposit gatherer and small business lender in the New York metropolitan area.
Mr. Travaglianti ignores the current rush by banks to break down the walls of Glass-Steagall. He has no interest in stampeding into brokerage or areas traditionally dominated by finance companies.
Instead, he believes his "almost plain-vanilla, nonsexy approach to banking," makes him stronger than his competitors. He even feels confident that the nearby money-center banks won't be able to muscle in on his small and midsize business lending territory.
Because large corporations are increasingly turning to the capital markets for their financing, banks are taking another look at companies with annual sales of less than $5 million. He believes lending to middle- market and small businesses has come into vogue by virtue of necessity.
"There's a feeding frenzy out there that has started to create a situation of lunatic behavior," Mr. Travaglianti said in a telephone interview from his Uniondale, N.Y., office.
Banks on Long Island are fighting over loan business so vehemently they are dropping rates and lowering standards, he said.
While declining to reveal how much potential business he has lost by refusing to cut rates and relax standards, he maintains that the climate is "creating situations that we should have learned in the last cycles. We created standards that made it too easy for banks to fail."
Pricing competition is occurring all over the country, but on Long Island the situation is particularly acute. Regional banks and money-center competitors have 500 branches located in Nassau and Suffolk, the two suburban counties east of New York City.
EAB, one of a dozen U.S. subsidiaries of Holland's ABN Amro, has 60 branches on Long Island.
Bank of New York Co., its leading competitor, has 99 branches. Other rivals include Chemical Banking Corp., with 73 branches, and Jersey City, N.J.-based National Westminster Bancorp, with 66.
Competition doesn't rattle Mr. Travaglianti because he believes that small and middle-market business lending is merely a passing fad for many banks.
"There are others that are very much in the market today. My suspicion is that they will be out of the market six months from now when opportunities in other markets open up," he says.
EAB, however, is here to stay. The bank saw its loan portfolio grow 42%, to $2.7 billion, over the past 15 months.
Confident in his track record, a year and a half ago Mr. Travaglianti pushed beyond Long Island into one of the most competitive markets in the world - New York City.
EAB opened an office in midtown Manhattan that focuses on small and midsize business lending.
The bank hasn't made much of a dent in Manhattan market share, but Mr. Travaglianti says almost 40% of EAB's business comes from its 26 branches in the other four boroughs of New York.
"Our identity is logically more closely aligned with Long Island, but If you look at the business flows as it relates to EAB, a significant piece is in Manhattan . . . I see tremendous opportunity for Manhattan and the boroughs," he said.
In October, EAB acquired New York-based Wasco Funding Corp., which leases office space and medical equipment, to complement his small and midsize business lending focus.
EAB may be reaping success from its niche strategy, but the bank learned the hard way.
In the early 1980s it chased commercial real estate loans and Third World lending, only to end up saddled with $750 million in bad loans. These nonperformers were eventually pushed off onto ABN Amro's books.
In those days, EAB was run by a consortium of European banks. In the summer of 1991, ABN Amro took majority control of EAB and named Mr. Travaglianti president and chief operating officer.
Applying a strategy that ABN uses in all of its U.S. banks, including its largest, Chicago-based LaSalle National Corp., Dutch executives gave him strict orders to keep close to EAB's traditional markets.
This was easy for Mr. Travaglianti. A Brooklyn native, he joined the bank as a trainee in 1970, when it was still known as Franklin National Bank.
Franklin collapsed four years later, crippled by foreign exchange fraud. It was soon taken over by the European consortium.
In the following year, Mr. Travaglianti was named senior vice president of middle-market lending for the new bank.
Eventually, his responsibilities were expanded to include corporate banking and real estate lending.
Today, EAB faces a rough-and-tumble world of bank mergers and acquisitions. But analysts say they don't see the Dutch selling out their profitable U.S. banks. Growth, however, is key to their survival, they say.
Mr. Travaglianti won't comment on how big he wants EAB to grow or which banks he might like to acquire, but he said his company is not averse to in-market acquisitions that fit EAB's niche.
"Before we look to Connecticut, Pennsylvania, or Georgia we're going to look literally in our own backyard," he noted.
Mr. Travaglianti also said EAB is in a stronger position to grow than many larger competitors because it has already gone through a drastic restructuring to improve its efficiency ratio.
Since the bank refocused its vision four years ago, it has slowly pared down staff to 1,800 from 4,500, he said, mostly by consolidating back- office functions and downsizing the commercial real estate lending operations.
Unlike some of its competitors, Mr. Travaglianti said EAB has learned its lesson about chasing profitable markets outside its niche.
"Their (the Dutch) idea of intermediate-term vision is 20 years. And long term is 50 years. We in America think five or 10 years is long term."
