Now that BB&T Corp. has a securities firm under its wing, one of the biggest challenges is making sure not to overwhelm the new unit with sales leads, executives of the banking company say.
Winston-Salem, N.C.-based BB&T bought Craigie Inc., a small Richmond, Va.-based securities firm, last fall. The banking company's executives say they view the deal as a learning experience as well as a defensive move to protect its corporate customer base.
Larger banks that have bought securities firms-such banks as Bankers Trust New York Corp. and NationsBank Corp.-have moved aggressively to refer their commercial banking clients to the new underwriting units. But executives at BB&T say that is not their plan.
"One of the things that we've seen in other organizations, if there's an attempt to totally integrate investment banking activity into a commercial bank, there can be some conflicts of culture," said BB&T's treasurer, Morris Marley, the day-to-day liaison between the bank and Craigie executives.
Craigie is significantly smaller than other banks' securities subsidiaries, Mr. Marley added. And BB&T does not want to send it more clients that it can handle, he said.
BB&T's road to the securities business has differed from that taken by some of its competitors. The banking company received Tier 2 debt and equity underwriting authority and acquired a securities firm-all in one fell swoop.
Most of the 45 bank holding companies with section 20 powers-a broad menu of securities capabilities requiring approval from regulators-have spread these decisions out over several years.
But industry observers say BB&T's acquisition of Craigie is not as brash as it seems.
"It may appear that BB&T is going from zero to 60, but in reality it is a very conservative bet," said Hal Schroeder, a bank equity analyst with Keefe Bruyette & Woods Inc.
Craigie-which has kept its name and operates as an autonomous unit of BB&T-only had 88 employees when the acquisition was completed last October. Since then, it has added 12 new staff members.
The bank became acquainted with Craigie through transactions for its own portfolio,
"When the idea first surfaced that we needed to get into the capital markets arena, they were the first people we approached to find out about the nature of the business and what we should look into as far as building our own infrastructure," Mr. Marley said.
From these informal discussions, the idea of an acquisition emerged. With offices in both Richmond and Charlotte, N.C., Craigie originates and trades both equity and debt instruments. It has specialized in municipal bond financing and has an active mergers and acquisitions practice. It also has a financial advisory arm.
BB&T was the product of a 1995 merger-of-equals with Southern National Corp. Both began as 19th-century farm banks.
Today, the multibank holding company with $22.1 billion of assets is known as Southern National. It operates 423 offices in 221 cities in the Carolinas and Virginia under the name BB&T. These branches try to stick to their community banking roots by relegating most decisions to the local level.
In that vein, BB&T is allowing Craigie as much independence as possible. Since the merger, Craigie has been governed by a strategic board made up of half BB&T and half Craigie executives.
Mr. Marley said BB&T and Craigie are a good match because both cater to small or medium-size customers who might otherwise be shut out of the market. And, he said, both the bank and the firm have always been relationship-oriented.
"There's always been a perceived idea that investment banking is so radically different from commercial banking," Mr. Marley said. "That's a hangover from the image of New York investment banking, with its high fees and an attitude of 'let's get the transaction done, we're not interested in the relationship.'"
