The banking industry shakeout will produce only a few clear winners, who will tend to be focused on relatively few lines of business, take an innovative approach to data base marketing, and radically reduce their cost structures.
That's the view of prominent bank analyst Thomas K. Brown, who spoke last week at the American Banker retail forum. Only four banking companies meet his criteria - Wells Fargo & Co., Citicorp, First Bank System Inc., and Signet Banking Corp. - but he said eight others are "making impressive progress."
"The winners are going to be those who understand how and why their customers individually buy products," said Mr. Brown, a vice president at Donaldson, Lufkin & Jenrette Inc.
"If 60% of the customers are unprofitable, I don't care, as an analyst, what your market share is," he added. "I'd rather that you had a smaller share of a more profitable customer base."
Mr. Brown said credit card specialists such as Capital One Financial Corp., Richmond, have become "category killers" that steal others' customers through their intense focus. "They have mastered data base marketing, and they don't have expensive distribution systems," he said.
He lauded Wells Fargo for reducing its cost structure dramatically by expanding its use of supermarket branches. And he criticized NationsBank Corp. for lacking focus, resulting in a price-earnings multiple below other megabanks'.
"What investors have said is that, if you get this huge conglomerate out there with 150 lines of business, you can't manage it well," Mr. Brown said. He suggested that NationsBank and other large banks "become competitive experts" in selected lines of business.
Mr. Brown, known for his outspokenness, didn't pick on NationsBank alone. He also chided the new Chase Manhattan Corp. for its bureaucracy and Mellon Bank Corp. for a scattershot approach to credit card marketing.
