Carpetbaggers they're not, but JPMorgan Chase and PNC are making their presence felt in Atlanta and throughout the Southeast, snapping up branches in states smacked by the financial crisis.
The banks' aggressive moves are putting local mainstays, such as SunTrust Banks and Synovus, on the defensive, particularly in metropolitan Atlanta, where JPMorgan Chase and PNC have big plans for retail banking. If either company succeeds, it will be the first time in at least 17 years or perhaps ever that a bank based in the Northeast would be one of the 10 biggest banks in Atlanta.
Observers say JPMorgan Chase and PNC are simply trying to strike while the iron is hot and competitors are weak. "SunTrust and Synovus have got to work their way through credit issues," says Robert Patten, an analyst at Regions Financial Corp.'s Morgan Keegan & Co. The newcomers "are using the opportunity to put a stake down. They probably view this as an opportunity to place strategic branches and offices to get their name down there."
SunTrust and Synovus are squarely in the crosshairs, observers say. Those banks, along with others that have a large Georgia presence, including Wells Fargo and BB&T, can expect a price war.
"For an out-of-market player to gain share, you've got to price down," Patten says. "It's going to be a net-net negative in this aggressive pricing environment — good for the clients, not so great for the banks' balance sheets."
PNC is entering Atlanta with two acquisitions. In June the Pittsburgh company announced an agreement to buy the U.S. retail banking operations of Royal Bank of Canada, including 52 RBC Bank branches in metro Atlanta. In July PNC announced it was acquiring 27 Atlanta-area branches from Flagstar Bancorp Inc. of Troy, Mich., for $42 million.
JPMorgan Chase, for its part, has combined its branch-building with acquisitions. The New York company entered Atlanta through its 2008 purchase of Washington Mutual Inc. JPMorgan Chase, which has 70 Atlanta-area branches, plans to build at least 28 more by 2013, a spokeswoman said.
On completing its two deals, PNC would have 79 branches and deposits of about $2.8 billion in Atlanta, based on June 30, 2010, data from the Federal Deposit Insurance Corp. It would make PNC the seventh-largest bank in the city. Atlanta is the ninth-biggest metropolitan area in the country. SunTrust is the biggest bank in Atlanta, with 22.9% of the $110.5 billion retail deposit market.
JPMorgan Chase could place even higher. If it is able to meet its growth projections it would have nearly 100 branches in metro Atlanta. Chase did not provide a growth target for deposits, but with 100 branches it would have the fourth-highest number of locations in metro Atlanta, based on FDIC data.
Joseph Guyaux, PNC's president and head of retail banking, said in July that the RBC and Flagstar deals would "complement our strategic plan for the Atlanta region and reflect our intention to become a competitor there." Fred Solomon, a PNC spokesman, would not elaborate on Guyaux's remarks. PNC will start to convert the RBC and Flagstar branches in December. Until then, "we don't expect to further telegraph our plans for the region," Solomon says.
Chase does not comment on its competitors, said spokeswoman Nancy Norris.
Patten and Bobby Schwartz, a banking lawyer at Smith, Gambrell & Russell in Atlanta, say there are few strategic options for SunTrust and Synovus, and neither Patten nor Schwartz believes the banking companies consider acquisitions — buying or selling — to be a viable near-term solution. "If there was anybody out there who would buy Synovus, they would have already done it," Schwartz says. "Larger community banks, especially the ones that are acquisitive, are complaining that the easy deals have already been done, and what's left has been priced too high, or is so bad in asset quality that nobody will touch it."
"I don't think SunTrust or Synovus will do anything different" in response to Chase and PNC, Patten says.
Relative financial strength notwithstanding, victory is far from assured for Chase or PNC. For one thing, the timing may not be right for such an offensive, given tepid loan demand. "It seems counterintuitive to begin an expansion now … since the only thing here that's ripe for taking is deposits," Schwartz says. "There is no loan business here that anyone wants."
And both JPMorgan Chase and PNC can look no further than the banks they've dealt with to enter the Atlanta market — RBC, Flagstar and Washington Mutual — to see that other out-of-towners have fared poorly in Atlanta.
SunTrust has been in Atlanta since its creation in 1891 as Trust Co. of Georgia, and the company has seen countless banks come and go, change names or otherwise withdraw from the city.
"The Atlanta market has been and continues to be very competitive from a banking perspective," says SunTrust spokesman Hugh Suhr. "We believe our focus on service and our deep roots within the community will continue to differentiate us from the competition."
Synovus spokesman Greg Hudgison declined to comment. Synovus, the holding company for Bank of North Georgia, is metro Atlanta's fifth-largest bank.
Wells Fargo, the second-largest bank in Atlanta after its 2008 purchase of Wachovia Corp., won't make any changes to deal with the newcomers, says Mindy Mercaldo, the San Francisco company's community bank president for Atlanta. Wells converted its Wachovia branches in Atlanta in October. "It's going to be hard for Chase and PNC to gain ground," Mercaldo says.
Maria Lachapelle, a BB&T spokeswoman, declined to comment. BB&T, based in Winston-Salem, N.C., is the fourth-largest bank in Atlanta.
With Chase and PNC in Atlanta, six of the top 10 U.S. banking companies by total deposits will have branches in metro Atlanta. The others are SunTrust, BB&T, Wells Fargo and Bank of America Corp. of Charlotte, N.C.
