Citicorp Gears Up to Grab Customers as Rivals Merge

NEW YORK - Citicorp plans to try hard to steal customers away from Chemical Banking Corp. and Manufacturers Hanover Corp. while they are busy merging, said Pamela Flaherty, Citicorp's division executive in charge of northeastern consumer banking.

"We already have an aggressive marketing campaign through 1992, and we plan to make it even more aggressive," Ms. Flaherty said in an interview. "We think we will get market share, but I don't know how much."

Under an agreement announced Monday, Chemical and Manufacturers aim to merge, creating the second-largest U.S. bank after Citicorp.

Chemical Is Confident

Though some customers may move their business to a new bank because of the merger, "we will keep most of our existing business," said Walter V. Shipley, Chemical's president, on Monday.

But Citicorp's Flaherty says inroads can be made.

"In a period of change, while these competitors are focusing on organizational aspects [of the merger], there is an opportunity to show we have something to offer," she said.

She noted that retail banking customers rarely switch banks unless branch closings, price increases, or other changes prompt them to consider it.

As part of the merger, Chemical and Manufacturers are likely to match each other's pricing, she said.

John McGillicuddy, who is Manufacturers chairman and is slated to become chairman of the merged company, said Monday that 70 branches overlap, mainly in Manhattan. Many of these branches are likely to close.

"Customers don't get fed up and leave in droves but might be more receptive" to other banks' overtures, Ms. Flaherty said.

An Optimistic Rival

Upcoming layoffs and a lack of capital at Citicorp will not hurt the push for new business, Ms. Flaherty said.

"Customers respond very positively to competent professionals selling good products," she said.

Citicorp's Tier 1 capital ratio, mostly common stock, is now 4.08%, while the new Chemical bank will begin with a ratio higher than 6% when it merges at yearend. Citicorp is trying hard to raise its ratio, but analysts say a quick lift will be difficult.

Citicorp also plans to eliminate up to 10,000 jobs, in addition to the 5,000 already cut this year. Manufacturers and Chemical are estimating that they will pare about 6,200 jobs in their merger.

The Question of Loyalty

The new Chemical may have trouble grabbing market share from Citicorp. "Citicorp customers are much more strongly loyal than the customers of other banks," Ms. Flaherty said.

Though Mr. McGillicuddy said the new Chemical will have the largest share of the New York consumer market, Ms. Flaherty said Citicorp's measurements show it to be in the lead - with 39% of the households, versus 32% for the combined rivals.

"We still feel we are No. 1, although they will be a formidable competitor in terms of size," she said.

She sees the Northeast economy staying difficult through 1992, with some signs of stabilization and sporadic improvement.

|Pockets of Opportunity'

"Clearly, it is not boom economic times. We have difficulties because our customers are having difficulties. But this doesn't mean that there are not real opportunities to be competitive in this marketplace," Ms. Flaherty said.

"There are pockets of opportunity in the local New York economy, such as immigrants. The large majority of people are still doing fine and have not lost their jobs," she said.

First-time homeowners and people sick of low yields on certificates of deposit are also good targets, Ms. Flaherty said.

Citicorp will be there pushing nontraditional banking products such as mutual funds and zero coupon bonds, she said.

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