The survival of the fittest has definitely played out among banks competing for middle-market business customers, according to more than 6,000 such companies.
The responses from 6,250 middle-market businesses about their banks — which included top tier, regionals and larger community banks — were part of a joint study due out this week from Novantas LLC in New York and the Connecticut research firm Greenwich Associates LLC.
Middle-market businesses in the survey said they were drawn to banks that more aggressively pursued customers instead of those that turned their focus inward, said Chris McDonnell, a vice president at Greenwich.
"Some banks saw opportunity in the turmoil of the markets, while others were more inwardly focused and, as such, more defensive because they may have been knocked down on their heels a little bit," McDonnell said.
He did not disclose the names of the banks that were rated higher than others, nor the names of the banks that were rated poorly.
The middle-market businesses on average said they stayed with banks that did not slash employees and maintained customer service.
"Those who had significant reductions in their work force impacted their quality and degree of account coverage because they had fewer people who were stretched thinner," McDonnell said.
Moreover, the businesses favored those banks that backed up their messages of being "safe havens," with strong service, he added. "It's quite clear the ones who were backing it up versus those who just had it in an ad campaign."
The study, titled "High Performing Banks Capitalize on Opportunities Created by the Market Disruption to Drive Growth," also gauged how well 11 top-tier and regional banks made loans and gathered deposits from middle-market businesses in the first quarter. The group included four of the top 10 and seven of the top 20 banks in asset size.
The 11-bank group had modest, 1% deposit growth, but the results varied widely among individual banks, said Mike Rice, a managing director at Novantas.
Banks that were perceived as strong expanded deposits by 18% to 20%, though Rice did not name them or any of the 11.
The group on average saw an 18% increase in "analyzed checking accounts," the accounts that middle-market businesses use to deposit funds from their operations and write checks to vendors.
Conversely, the banks on average saw a 4% decline in money market accounts and a 23% decline in sweep accounts. Higher fees for services and other expenses ate into the sweep accounts' balances.
Loans on average declined by 2%. Though customers dictated the extent of the banks' deposit growth, loan growth was much more managed by the banks based on their liquidity positions and credit appetite, Rice said.
"The banks perceived as high-quality institutions actually shrank their portfolios as a strategic move," he said.
Commercial real estate loans in the group declined 1% on average, surprising the consulting firms; they had expected double-digit declines on average in this risky asset class, said Don Raftery, a managing director at Greenwich. "The banks were far less willing to lend for new projects. However, banks were lending to fund new projects due to pre-existing contracts," Raftery said.
"So they're not able to wind down their real estate portfolios as quickly as some bank management teams would like," he said.
The survey of the middle-market businesses was part of a "rolling study" of 25,000 such companies conducted throughout the year. The 11 banks were interviewed during the second quarter.