Former FDIC Chief Touts Banks that Stress Marketing

L. William Seidman, who shuttered 1,000 financial institutions as chairman of the Federal Deposit Insurance Corp., is very forthright about investing in the banking industry.

Banks that are not "marketing organizations" with growing revenues and reduced exposure to interest rate swings are not institutions to be betting on, he told a conference Wednesday in New York.

He also disregards formal analysis as a way of identifying acquisition candidates. "If you want to know when banks are going to merge, get a list of the chief executives' retirement dates," he said.

Mr. Seidman, who steered the industry through the savings and loan crisis and other predicaments, was speaking to 150 financial analysts and money managers at a banking conference sponsored by the Association for Investment Management and Research.

The analysts, who are used to crunching numbers and poring over spreadsheets before making investment recommendations, appeared to welcome his plain-spoken approach.

"He's on the mark," said Michael J. Ancell, financial services analyst at Edward D. Jones & Co. "He remains one of the best observers in the industry."

"Overall, you've got an industry that's subject to huge competition, and that increases management competence," Mr. Seidman said.

But not all banks are taking necessary steps, like promoting the industry's interests in Washington and developing more of a sales culture, he said.

He lauded Citicorp chairman John Reed for recognizing that traditional banking, through tellers and automated teller machines, will not soon be replaced by the Internet and other electronic methods of banking. "It's going to take a long time to change customers' habits," Mr. Seidman said.

NationsBank Corp. earned high marks from Mr. Seidman for its approach to banking, including growing through acquisition and expanding services.

U.S. Bancorp also ranks highly with him because of chief executive officer John Grundhofer's steps to reduce balance-sheet risk through securitization and other efforts.

Banking representatives said Mr. Seidman's approach, while blunt, is practical. "He's on target," said Patrick A. Reynolds, senior vice president at Synovus Financial Corp. "A lot of this makes sense."

Mr. Seidman also set his sights overseas, warning that Asian and other woes are far from over. "The cleanup of the Japanese bank system and the real knowledge of where it stands is a long way off," he said.

He added that Mexico and the rest of Latin America are not as solid as may be believed. "I would request a second look by those who think the banking system is fixed" in Mexico, he said. The country "hasn't dealt with the real problems on the sides of assets and weak management."

Mr. Seidman also forecast:

Tough going for the effort to secure support in Congress for funding the International Monetary Fund program to shore up overseas banks.

No banking reform legislation from Congress in 1998.

A continued rush by financial services firms to obtain thrift charters.

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