After a five-year hiatus, National City Corp. has regained command of its own special global banking niche.
The Cleveland companys National City Bank of Indiana beat out the much larger Bank of America Corp. to win a $1.7 billion contract to provide banking services for U.S. military personnel stationed overseas.
The five-year contract with the Defense Department, announced late Wednesday, went into effect this week. It gives the $89 billion-asset company control of 100 branches in Asia and Europe from which to recruit customers and to potentially boost its domestic retail deposits. The contract could be worth more than $1.7 billion if all options are exercised, the bank said.
It gives an opportunity to provide services to 100,000 new customers who may come back to the U.S and continue banking at National City, said Stephen A. Stitle, chairman and chief executive officer of National City Bank of Indiana.
The deal marks a return to banking for the military for National City. The company started providing banking for the Defense Department after buying Merchant National Bank, which was under contract for services from 1986 to 1995. Bank of America then was awarded a five-year military contract.
One has to presume they know what they are doing, said Henry Neill, executive vice president of the Association of Military Banks of America. This puts them back in the game.
The contract should also help Nat City raise its profile in retail banking, which has slipped as the company concentrated on its commercial business, said David George, a stock analyst with A.G. Edwards & Sons in St. Louis.
Retail banking has been National Citys biggest challenge, Mr. George said. They have struggled to bring a lot of retail deposits in the door. Obviously this is a positive.
The new contract enables uniformed and civilian members of the military to use National City for retail banking services and currency conversions, and provides access to the banks automated teller machines.
National City plans to set up a military banking center with more than 100 employees at Bean Financial Center at Fort Benjamin Harrison in Indianapolis. Bank of Americas military center is in San Antonio. We will be ready [in Indianapolis] as soon as we get the facilities available and the people, Mr. Stitle said.
National City will take over the management and the operation of 100 Bank of America military branches in Germany, the United Kingdom, Japan, Iceland, South Korea, Okinawa, Honduras, the Netherlands, and Cuba. It will also operate 250 ATMs throughout the military banking network.
The company will also take over five regional operation centers in Germany, Japan, Okinawa, South Korea, and United Kingdom, and the 1,200 employees in that network will become National City Bank of Indiana employees.
Jim Fitzpatrick, director of military banking at the bank, said it will provide fundamental community banking services. He added, It is wonderful to have the business back in the fold.
The Defense Department began soliciting for offers in early 2000. It said it had received 25 bids from banking companies, but did not name them.
We certainly had our eyes on this, Mr. Stitle said. We had a very good relationship with the Department of Defense. The opportunity to work with the government may provide other opportunities.
Mr. Stitle described the $1.7 billion contract as big to us. He declined to say how much it bid for the contract.
National Citys pact with also includes a provision for five one-year renewals after the original five-year contract expires. Defense seeks to establish greater permanency, Mr. Fitzpatrick said. We will have permanent headquarters in Indianapolis specifically for military banking.
The department will decide whether to extend the contract annually after the guaranteed five years. A representative from the departments finance and accounting services unit did not return telephone calls Thursday.
It is our goal to meet the goals of the Department of Defense, Mr. Fitzpatrick said.
Mr. Neill said the change in banks is not due to performance. Bank of Americas military bank provided very fine services for military personnel Mr. Neill surveyed overseas, he said.
