DALLAS -- When it landed in Texas, the old NCNB Corp. carried a heavy burden: a moniker which rivals mockingly said meant a loan policy of "No Cash for Nobody."
Its successor, NationsBank Corp., has shaken that image, especially in the small business lending area. The Charlotte-based superregional had nearly $4.2 billion in small commercial loans at June 30, ranking tops among all bank holding companies. To boot, Texas accounted for 15% of the total.
As a primary architect of the Texas bank's consumer strategy, Robert Rork has seen the market evolve into the highly competitive battle front for small business banking.
With his retirement as an executive vice president effective at yearend, Mr. Rork recently discussed the future of the niche and the issues that will drive it.
Q.: What are some of the challenges facing banks face in serving the small business market?
RORK: One of the challenges we've always had in small business is getting these companies to keep good records and to keep them consistently.
What several people have done is create a book so that the data was all translated by their solicitor to a common format so that they could manage it better.
We would like to get to a point where we could scan the information. The rest would be done automatically. But I think we're a long way away from that.
Q.: Is credit scoring the first step in this process?
RORK: I've been convinced you could score them for about five or six years, but I couldn't sell it at the time. We have been scoring everything in small business for about a year, though, and it seems to be providing very consistent decisions with our judgmental decisions.
Q.: What will change the way banks deliver products to small business?
RORK: You're already seeing some on-line cash management products that are available for small business. We've got one that we're piloting in Maryland called Business Express, which is a PC-based cash management tool.
It works off of equipment most of these companies already own, and allows them to take care of straightforward services like checking their balances or transferring money between accounts. At some point down the road, we expect to set up a line of credit on this system so they can make themselves a loan.
Q.: What about alternative branches?
RORK: I think you will begin to see some of these limited service facilities begin to be more effective in support of business. One of the things we've found in our Houston grocery stores is that these branches do less small business work than our other regular branches. Part of that is a learning curve, though.
The typical small business person doesn't think about going to the grocery store to take care of his banking needs. But if we link services and these branches together right, and if we create the right kind of infrastructure there, I think you will find it can work for a lot of different kinds of small businesses.
Q.: Is delivery headed the way of straight consumer banking?
RORK: I think in the next three to five years, you're going to see a lot of new bank delivery mechanisms. For one, banks have not to this point used the ATM too much for small business. I think there are some ways to do that.
I also think the telephone is going to get a lot more significant in the delivery of both consumer and small business services. I think this type of delivery system will move into the lower end of small business fairly rapidly.
Q.: Where will the profit in small business banking come from?
RORK: Almost every branch was organized for the purpose of selling credit. But the profit is in selling deposit relationships, especially small business deposits which will have a higher proportion of non-interest bearing deposits. The return on equity on the deposit side is high.
Q.: What does this say to banks looking to make the most of their small business relationships?
RORK: It would advocate that you can't be one dimensional. You can't just focus on deposits. The credit for most small businesses is the hook. You get the customer in the door by doing a loan transaction for them.
In the past, what we found is that too often our people didn't sell the rest of the relationship. Today, we're trying to get them to focus on that and I think everybody is doing that to a certain extent.
