People's Bank in Connecticut has embarked on an aggressive, $30 million expansion in hopes of capitalizing on customer unrest after Fleet Financial Group's planned merger with BankBoston Corp.
The thrift said it plans to open 30 branches in the state during the next two years, mostly in populous Hartford and New Haven counties. Though the 130-branch People's network already extends statewide, the thrift said there are holes it would like to fill.
"We have said for some time that we are committed to being Connecticut's bank," said John A. Klein, president of the $10.4 billion-asset thrift based in Bridgeport. "We have a number of branches in both of those counties, but in both cases we felt we still have many opportunities."
Kevin T. Timmons, an analyst at First Albany Corp., agreed that People's needs to look beyond its native Fairfield County for growth. He said building branches is a more attractive way to grow for banks that are unwilling to pay high acquisition prices.
"With the premiums being paid today, building out has apparently become a viable option," he said.
Another option would have been to bid on the $1.53 billion of deposits and 33 branches Fleet and BankBoston plan to sell in Connecticut to win approval of their $16 billion merger. Mr. Klein said that People's considered bidding but ultimately decided that the expected 10% premium on deposits was too step a price.
"Looking at the numbers, it simply made no sense to us to bid," he said. "We would be paying a high price for disaffected customers in locations that were not necessarily to our choosing."
Instead, Mr. Klein said, he believes the company can take advantage of the disruption caused when banks change hands. The goal at People's is to generate $1.2 billion of deposits from the new branches in their first five years.
James Ackor, an analyst at Tucker Cleary Capital Markets in Portland, Maine, said he is withholding judgment on the People's plan. Though agreeing that fallout from the Fleet deal could help People's attract deposits, he said he worries when he sees any company using a strategy that most others are abandoning.
"There is a trend afoot in the industry to forgo new branches in favor of technology," he said. "Whether the strategy is right or wrong remains to be seen, but I would definitely consider it to be controversial."
Mr. Klein said People's has shown it can attract deposits through its 44 supermarket branches, all of which have been opened since 1995. The in-store offices recently grew past $1 billion of deposits, he said.
"We have proven we can generate deposits," he said. "This is the next logical step for us."
