After a long slump, spending by banks and thrifts on local media advertising appears to be rebounding.

Among the reasons: Banks are busy peddling mutual funds and other products to the millions of consumers who are increasingly alarmed by today's low interest rates.

First National Bank of Chicago is one of the most striking examples. The First Chicago Corp. unit expects to increase its local advertising budget by about 70% this year. Among the products it plans to push are home, auto, and boat plans.

Protecting Market Share

"Our spending level in '91 was significantly below the competition," said John Tomick, who oversee the bank's marketing services division.

"Now is a good time to reinforce our leadership position, and to do whatever it takes to make sure our market share is not encroached upon."

In Boston, advertising spending by banks and thrifts this year is about 20% over last year's level, according to Jack Mutrie, account executive specializing in financial institutions with The Boston Globe.

He said Bank of Boston is running color ads for certificates of deposits, Shawmut Bank is touting home-equity lines of credit, and BayBanks is going after mortgage loans.

Bank and thrift advertising also is picking up in Baltimore, according to John Kenealy, local sales manager for WBAL, the CBS affiliate in Baltimore.

Loyola Federal Savings Bank, a healthy institution, has launched its largest image advertising campaign ever. And Riggs National Bank, Washington, also plans to increase local spending this year.

Emphasis on Products

"We're going to turn up the volume on the product side," said David Palombi, Riggs' director of communications. However, Mr. Palombi said his company planned to spend less on image promotion this year.

To be sure, local media spending by banks and thrifts has been declining steadily for three years, according to Voice Trak Inc., an advertising research company based in Tuscon, Ariz.

In 1991, for example banks and thrifts spend $679 million on local media - a decline of 12% from the level a year earlier, Voice Trak said.

The retrenchment continued in the first quarter, with spending falling an additional 10.3% to $146.5 million from $163.3 million.

But institutions in some markets, including New York, Cleveland-Akron, and Nashville, actually raised their spending last year. And VoiceTrak expects an increasing number of banks and thrifts will soon follow suit.

Looking Up from the Bottom

"Like every other cycle there is a bottom; we think we are there," said Mark Evers, managing partner of VoiceTrak. "At least in the advertising category, I don't see it getting any worse."

VoiceTrak compiles media expenditures for clients by calling about 5,000 television and radio stations, newspapers, magazines, and billboard companies each quarter.

The numbers reflect pure media spending at the local level, and do not include national campaigns, direct mail, or promotional activities such as sponsoring the symphony.

VoiceTrak's numbers are conservative because the survey covers about 80% of the United States, and about 20% of the media it contacts will not reveal dollars spent on advertising.

Bank and thrift spending on advertising has been declining in recent years because of massive losses racked up by both industries. Also contributing to the decline is the growing number of mergers and a reluctance to advertise for deposits when many institutions already are flush with funds.

Surge by Citicorp

In New York, the nation's largest media market, advertising outlays by banks and thrifts last year jumped 12.5%, to $115 million. That compares to a 20.6% decline in 1990 and a 0.5% increase in 1989.

The gains were spurred by Citicorp, which spent $21.2 million on local advertising in 1991, up 36.8% from the year before, Mr. Evers said. Chase Manhattan spent $15 million, up 57.9%, and Manufacturers Hanover spent $9.2 million, up 50.8%.

"It is still an enormous market and there are still some really powerful banks," Mr. Evers said.

Officials with Citicorp and Chasecould not be reached for comment. An official with Chemical Banking Corp.'s Manufacturers Hanover unit said he was unsure how much the company spent on local media, but he said the 50% increase sounded too high.

In Cleveland/Akron, the 11th-largest media market, VoiceTrak said spending grew by 30.2% to $10.5 million, compared to an 18.6% decrease a year earlier and a 19.2% increase in 1989.

Of the 50 largest media markets, only 10 showed increases in dollars spent by banks and S&Ls during the period, according to VoiceTrak.

One of the hardest hit was Chicago, where advertising spending by banks and thrifts fell 27% to $35.2 million in the local market. That marked a dramatic turnaround from the preceding two years, when advertising increased by about 20%, according to VoiceTrak.

In Detroit, the eighth-largest media market, advertising spending by banks and thrifts declined about 20% to $9.1 million, compared to a 6% decline in 1990 and a 25% increase the previous year.

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