CoreStates Financial Corp. is stepping up its role as a provider of processing services to overseas markets.
In recent months, the Philadelphia-based bank has moved to open offices in Korea and China while fine-tuning its sales and computer operations. In addition, the bank is stepping up its short-term credit facilities to 1,200 correspondent banks around the world.
"We got in early, we're very price competitive, and our overseas branches are committed to processing," said Michael P. Heavener, executive vice president in charge of CoreStates' international banking group.
CoreStates' push into global processing has brought it into competition with heavy hitters like Chase Manhattan Corp., Bank of New York Co., Bank of Boston Corp., Citicorp, BankAmerica Corp., HSBC Holdings PLC, and Standard Chartered PLC.
But what distinguishes CoreStates from others is its single-minded pursuit of international electronic banking.
"They have a fabulous international franchise" said Thomas McCandless, a banking analyst at Natwest Securities. "It's a high-volume, processing- oriented, low-margin, rent-out-the-back-office business that is the envy of a lot of bankers who are trying to grow their international operations but don't have that kind of presence."
CoreStates' decision to put its sales force to work in tandem with computer experts comes as analysts increasingly emphasize that buying technology is not enough.
"The competitive advantage doesn't lie in technology; it lies in execution," said Gerard Cassidy, senior vice president at Tucker Anthony Inc., Portland, Maine. "The winners will be the ones who can execute, and the losers, the ones who can't, even if they have the technology."
The bank opened offices in Kuala Lumpur, Malaysia; Shanghai; and Mexico City in 1995; Dubai, United Arab Emirates, in 1996; and Beijing, as well as a full branch in Seoul, South Korea, this year.Last year, the bank increased cross-border lending nearly 70%, to $1.76 billion.
Closer to home, CoreStates has added customers by merging with Meridian Bancorp and is also building a network dubbed "Gateway to America" to handle large-volume, small-value payments transferred by European correspondent banks to banks in Canada and the United States.
And both inside and outside the United States, CoreStates has reached a growing number of agreements to serve as a third-party processor for trade- related transactions between banks.
"We were probably one of the first to understand that third-party processing is a logical extension of correspondent banking," said Mr. Heavener. "We think there are many institutions who don't have the scale or the resources to operate a state-of-the-art trade processing center."
CoreStates executives said they believe they have several advantages over the competition. First, they got in ahead of others.
"We went in early, we're highly price competitive, and we're very committed," Mr. Heavener said. Other banks, he argued, are still in "the early stages" of developing systems.
Second, CoreStates' smaller size makes it more efficient. "Only a handful of banks can deliver global capacities, but we can deliver them more readily," said Charles H. Silverman, vice president and manager of global trade services.
Still another advantage: Unlike other big U.S. banks with international operations, CoreStates isn't competing for commercial banking business with local banks overseas. Such local banks, Mr. Heavener said, are therefore more willing to let CoreStates handle their processing because they know the bank isn't going to steal the business.
One question: Does CoreStates have the resources to continue investing in technology as the business expands?
"Right now, its a fast-growing business, and it's very manageable," said Tucker Anthony's Mr. Cassidy. "But if the expansion becomes so large they can't fund it, they may have to join forces with someone else down the road."
"They need critical mass to support their expenses," said Frank J. Barkocy, managing director at Josephthal Lyon & Ross. That, he added, means "either they bring in added volume or bring in a strategic alliance."
Mr. Heavener himself dismisses speculation that CoreStates won't be able to manage on its own. "We have the resources, and we'll remain a major player in this market so long as we continue to use them intelligently," he said.
Strategic alliances, he added, are possible. But if they do come, "they're more likely to be with technology companies than with other banks.'