Go big, or go home.
Bankers more than ever are putting business customers on such notice, making clear that only large, all-encompassing relationships will do.
In a world of low rates and a sputtering economic rebound, simply taking out a loan is not good enough, executives from Fifth Third Bancorp, FirstMerit and Signature Bank said Monday at the Barclays Global Financial Services Conference.
"Credit-only relationships are not sufficient to produce our targeted returns," said Kevin Kabat, the vice chairman and chief executive of Fifth Third in Cincinnati.
It's nothing new for regional and large banks to preach the need to cross-sell products. But the renewed emphasis coincides with heightened regulatory pressures.
"Current capital and liquidity rules" are forcing the $131 billion-asset Fifth Third to seek out "ideal clients [who] have a need for a wider scope of scale in banking relationships," Kabat said.
Kabat and other bank executives strongly suggested that much of their growth the rest of this year in both fee income and net interest income will come through an expansion of commercial lending. That bucket includes everything from manufacturers, to farmers, to real estate developers.
"There has been a manufacturing renaissance in the Midwest," said Paul Greig, the chairman and CEO of the $24.6 billion-asset FirstMerit in Akron, Ohio. The bank's borrowers "have to carry higher levels of receivables and inventories, and hence they need increases in their lines of credit and they've had higher utilization of lines of credit."
The numbers bear out bankers' claims that commercial lending is one of their top priorities. Commercial and industrial lending now makes up about 46% of Fifth Third's total loans, up from 34% in 2010.
Commercial borrowers are the most coveted because they are the customers who will buy banks' long list of products and services.
Banks are scrambling to build up platforms to seize commercial business. The $24.5 billion-asset Signature Bank in New York has poached five lending teams from rivals this year. Many of those bankers are additions to Signature's asset-based lending group, which includes equipment finance and leasing.
"Our expansion continues to support the growth that we will continue to have," said Joseph DePaolo, president and CEO.
Fifth Third is exiting its Vantiv payment-processor investment. But it's also building a new payments division, because it still wants to sell payments services to its commercial borrowers, Kabat said.
"Our ideal clients have a need for a wider scope of scale in banking relationships," Kabat said. "That produces the stronger returns we're looking for."
Fifth Third is also developing new specialized industry lending teams to target retail, food and agriculture.
"Although it takes time to expand into a new vertical, we think it represents a significant future revenue opportunity," Kabat said.
Synovus Financial in Columbus, Ga., will continue to bulk up its commercial lending in niche areas, such as senior housing, syndications and asset-based lending, Chairman and CEO Kessel Stelling said during his presentation at the Barclays conference.
The $26.3 billion-asset company sees opportunities for lending to middle-market companies in its territory and is hoping to expand its relationship with commercial customers by signing companies up for additional services, like treasury management, he added.
FirstMerit has been able to add new products to the customer base it obtained through its April 2013 acquisition of Citizens Republic Bancorp, Greig said.
"We talked early on about having the ability to cross-sell our indirect loan business and installment loans and that cross-selling and cross-fertilization has definitely occurred," Greig said.
Citizens did not offer indirect auto lending, but "they were very good at small marine, towboat and [recreational vehicle] indirect lending," Greig said. FirstMerit added its indirect auto lending onto that platform, he said.
FirstMerit is also expanding its commercial real estate lending, focusing on industrial space, non-speculative office space and shopping centers. FirstMerit is also seeing "significant demand" for multifamily loans across the Midwest, Greig said.
"We don't see a bubble building," he said. "It seems to be that the building is following demand, instead of the supply getting ahead of demand."
Jackie Stewart contributed to this article.