Wintrust Sees Room to Go Big in Chicago

Ed Wehmer started Wintrust Financial Corp. (WTFC) two decades ago in the wake of the last big banking cycle. "We had no illusions of grandeur," he recalls. "We thought we'd have a couple of banks and live the life of George Bailey."

Back then, a host of local names-First National Bank of Chicago, Continental Bank, Harris Trust & Savings and LaSalle National Bank among them-dominated the Windy City's banking scene. Wehmer's investor clients in suburban Lake Forest appreciated having big, locally run banks nearby, but also wanted a more personal touch.

Today, the giants are gone, having been gobbled up by bigger, out-of-state companies, leaving $17 billion-asset Wintrust, with its 112 branches, $12.5 billion in deposits and 4 percent market share, as Chicagoland's largest independent commercial banking company. (Northern Trust is still there, but it has maintained a wealth management focus.)

For Wintrust, it's an odd twist of fate-the outfit was launched as an antidote to larger institutions. But Wehmer considers the lack of even one homegrown bank to carry the city's flag on the global stage as something of an embarrassment.

As they gathered last summer to celebrate Wintrust's 20th anniversary, he and his board decided to try to do something about it. "We said, 'Chicago is the best city in the world. It deserves to have its own big bank. Why can't we be that bank?'" Wehmer says.

"So we're going to make a run at it. Our plan is to get into all 50 neighborhoods in the city of Chicago, and to be in every suburb," he adds. "We think we can do it."

Last year, Wintrust moved about 25 miles closer to the city, relocating from Lake Forest to Rosemont, Ill., which borders Chicago directly to the northwest.

Befitting the market's competitive nature, Wintrust isn't the only institution in position to pursue the mantle as Chicago's hometown banking giant.

At least three other commercial banks with local roots - PrivateBancorp (PVTB), MB Financial (MBFI) and First Midwest Bancorp (FMBI) - are frequently mentioned as contenders.

Each of Chicagoland's so-called "Big Four" has emerged from the financial crisis bigger, stronger and smarter than when it started. They all have the potential to be buyers in a market that is decidedly overbanked.

Each also could be an attractive target for one of the out-of-state giants angling for a bigger share of what is perhaps the nation's most dynamic banking market. Christopher McGratty, an analyst with Keefe Bruyette & Woods, says Chicago's Big Four are "the most logical candidates" to power a consolidation that he sees as being necessary "just for profitability's sake."

Chicago might deserve its own local flag carrier, but that doesn't mean it will get one. Aside from Wehmer, no banker will publicly acknowledge coveting the status, though the idea appears to have at least crossed their minds.

Shortly after Bank of America (BAC) acquired LaSalle in 2007, PrivateBancorp hired away 300 bankers, including CEO Larry Richman. The company has doubled in size since, to $13.3 billion in assets, fueled by more than 800 "significant business relationships" lifted from the old LaSalle.

"What we found was that it was important to Chicago to have a hometown business relationship bank," Richman says. "There was a real sense of loyalty."

Mitchell Feiger, CEO of $9.5 billion-asset MB Financial, says he researched the value of local crowing rights and came up with a slightly different answer. "Is it an advantage to be known as 'Chicago's bank?' It used to be, but I don't think it is anymore. Money is money. People don't care anymore where a bank is headquartered."