Almost a year after acquiring Provident Financial Group Inc., National City Corp. is using its now-nationwide leasing business to attract more core middle-market customers.
When the $140 billion-asset Cleveland company took over Provident in July, it more than doubled its leasing assets and brought on board a nationwide leasing platform run by seasoned professionals.
Instead of folding Provident's leasing business into its own, Nat City did the reverse. It moved its leasing business from Louisville to Cincinnati, where Provident was based and where Vince Rinaldi, a Provident leasing veteran, had built up the business and staffed it with a team of experts.
Mr. Rinaldi is now the chief executive officer of bank leasing operations at National City Commercial Capital Corp., the entity formed by the merger of the leasing businesses. He sold his leasing company, Information Leasing Corp., to Provident in 1996, and ran its leasing business until the Nat City acquisition.
Provident brought $2.1 billion of loans outstanding to Nat City's leasing portfolio of $1.4 billion. The leasing business accounted for 9% of its wholesale banking portfolio at the end of the first quarter. Mr. Rinaldi said he expected the business to originate about $1.8 billion to $2 billion of loans this year.
Nat City is using Provident's expertise not only to expand its leasing business, but also to get leasing customers to use traditional banking products and services, such as credit lines.
One longtime Provident leasing customer that Nat City has retained is a large truck manufacturer in Chicago, which now has a revolving credit with Nat City.
Nat City had a "bank leasing company," where it offered leasing to corporate customers in its midwestern markets, Mr. Rinaldi said in an interview last week. Provident, on the other hand, had a national business with a well-developed vendor-financing program, he said.
Several banking companies, such as KeyCorp in Cleveland, PNC Financial Services Group Inc. in Pittsburgh, and U.S. Bancorp in Minneapolis, have used nonbanking services such as leasing, asset-based lending and equipment financing to not only meet all the funding needs of their commercial customers, but also make them more profitable by generating fee income. In doing so, they have been competing among themselves as well as with specialized finance companies such as CIT Group Inc. and GE capital.
In the last couple of months Nat City has used Provident's business model to enter into the east coast market by hiring 11 leasing professionals from Boston to Florida.
Nat City is also using its capital base to make acquisitions in the leasing industry. Since the Provident acquisition it has bought two companies: In January it bought Charter One Vendor Finance LLC, from Charter One Bank, in Cleveland. In November, Nat City acquired Alpine Capital Corp. in Deerfield, Ill. The company did not disclose the price of either transactions.
Paul Geraghty, a Nat City veteran and the executive vice president in its specialized banking group, who oversees National City Commercial Capital Corp., said its capital base and low cost of funds lets it make deals that had eluded Provident.
Nat City's "adequate capital base give us ability to make strategic acquisitions and grow in a more focused way," he told investors at a conference May 26.
"Vince and his people are more adept at creatively and carefully structuring transactions to make National City more marketable," Mr. Geraghty added in a telephone interview.
"The Provident acquisition has … [opened] multiple doors of growth that we didn't have before when we were running our bank leasing business," he added.
National City Commercial Capital, through the vendor program of leasing, can also make a lot of smaller deals, such as leasing office equipment and machine tools.
"National City's platform didn't allow us to do small office equipment" kind of deals, but the commercial capital unit is structured to do that, he said.
Fred Cummings, an analyst with KeyBanc Capital Markets, said Provident has broadened Nat City's service base to include small-ticket leasing. Nat City's leasing business had focused more on large corporate customers, he said.
Mr. Geraghty said he views leasing, asset-based lending, and derivatives services as high-margin fee income businesses.
"The bigger you can make the [menu of choices], the better the opportunities are to meet the needs of our clients," he said.
