Marine Folds Bond Work into Private Bank Group

Marine Midland Banks Inc. is shifting accounts and employees to its private banking group from the municipal bond business that it closed last week.

The effort follows a reorganization of the private banking group and is part of the Buffalo-based bank's third major push in five years to expand its affluent customer base.

Marine Midland, a beleaguered unit of Hongkong and Shanghai Banking Corp., is disposing of noncore businesses in an attempt to return to profitability. Last week, the bank started transferring about 3,500 individual clients and the retail sales staff from its municipal business to the private banking group.

A First Step To Consolidation

Susan E. Rau, senior vice president of the private clients, employee benefits, and trust services group, called the transfer of clients "the first step in consolidating the investment division."

The renewed emphasis on attracting more wealthy consumers and serving them through one unit is part of Marine's effort to "redefine ourselves as a bank," she said.

In the competitive New York private banking market, the banking company has about $10 billion in private assets under management, roughly the same as Chemical Bank's operation. By expanding its portfolio, Marine hopes to double the division's profits within five years, Ms. Rau said.

Opportunity for Growth

David Ross Palmer, a private banking consultant based in New York, said Marine's private banking business holds "the possibility of a sleeping giant awakening." Because of its extensive retail network, particularly in upstate New York, he said Marine has "immense undeveloped potential."

Last year, Marine Midland sold its international private banking business to Barclays Bank PLC and moved its private banking and trust division into the retail unit from capital markets. After suffering from some credit quality problems, it is now focusing on domestic customers who want individual portfolio management and secured credit.

This spring, the bank added an asset management account for individuals who are just breaking into the ranks of the affluent. That service is available to people with as little as $50,000 to invest, a minimum far lower than most of Marine's competition.

Ms. Rau said the bank wants to increase profits by targeting a "varied market segment" - transactional customers, the emerging wealthy, and very high-end clients. With the addition of the municipal clients, the private clients group now has about 25,000 customers.

The challenge, Ms. Rau said, is to retain the 3,500 transferred customers and persuade them to expand their business with the bank. "Many of these clients have only part of their assets with us."

Norman Jaffe, a banking analyst at Fox-Pitt Kelton, New York, said: "It makes some rational sense to consolidate high-net-worth private banking in one unit."

$130 Million in Deposits

Marine, which runs its private banking operation from eight offices across the New York State, has $80 million in loans outstanding to wealthy clients and carries $130 million of their deposits.

Mr. Palmer, managing director of David Ross Palmer and Associates, called Marine's mixture of loans to deposits "a very conservative picture."

PHOTO : Susan E. Rau Says bank is redefining itself

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.