In a presentation this month David Daberko, National City Corp.'s chief executive officer, touched on the familiar topic of Midwest deposit competition and noted that a once tough competitor appears to have changed its tactics.
Trying to figure out how rivals are faring at gathering deposits is nothing new in the Midwest, where competition is stiff, and in this case Mr. Daberko was accurate in his assessment.
Charter One Bank, the Cleveland company that Citizens Financial Group Inc. of Providence, R.I., acquired nine months ago, confirmed that it has changed its approach to retail banking. It said it has backed off its previously aggressive efforts to open checking accounts and is now more focused on creating relationships with its retail customers.
Since last fall the customers, who were used to getting nothing more than plain-vanilla free checking, have been wooed by their bankers who want to cultivate an ongoing relationship. The change in style reflects the style of Citizens and its parent, Royal Bank of Scotland PLC.
Cindy Schulze Flynn, a senior vice president and regional marketing director who has been at Charter One for five years, said its free checking was the "absolute emphasis" for the two years before the Citizens acquisition.
"We were really marketing around getting the customer in, but not around the experience of the customer," she said in a telephone interview Thursday. "It was not really focused on what the consumer really needed, but focused on what the bank was selling, and Citizens has a different approach."
Mr. Daberko told investors May 12 at the Lehman Brothers Financial Services Conference in London that competitors such as Nat City have taken note of the change. With Charter One backing away from free checking, "there has actually been some opportunity in that particular business," Mr. Daberko said during a question-and-answer session.
Nat City plans to take advantage of the opportunity, he said. "We want that household checking account."
Peter E. Raskind, Nat City's executive vice president for consumer and small-business financial services, said that his company has competed with Citizens in western Pennsylvania since it bought the retail business of Mellon Financial Corp. of Pittsburgh in 2001.
Nat City is very familiar with Citizens' strategy, he said in a telephone interview Thursday. "Citizens' strategy is broader, and one that encompasses small business in a very meaningful way."
Ms. Flynn noted that Charter One (which retained its name in Ohio, Illinois, Michigan, and Indiana after the acquisition) still offers free checking, but it has stopped advertising it in its midwestern markets. Instead, it is telling its customers, "We want to be your primary bank, not secondary or tertiary bank," she said. Those who buy other services from the bank get rewards such as discounts on loans or better rates on products such as money market accounts or certificates of deposit.
In November, Charter One introduced Green Checking, a basic checking account with no minimum balance requirements, and the Circle Account, which offers a package of deposit products with rewards for higher balances.
Once the system conversion is completed in September, customers will be offered Circle Gold, a package that includes interest-bearing checking accounts, Ms. Flynn said. Charter One was unable to provide any numbers to determine how successful its strategy has been to date.
Gerard Cassidy, an analyst with Royal Bank of Canada's RBC Capital Markets, said Citizens' strategy of delivering a full array of products geared toward the average-income household would fit well with Charter One's customers. However, he said it is too early to tell whether the strategy would have a meaningful effect in the Midwest.
Meanwhile, though competitors such as Nat City may feel they have some breathing room in deposits, Charter One said it has upped the ante in the competition for small-business customers. Charter One did not use to have a dedicated small-business lending unit, but it became aggressive in pursuing that market after the acquisition.
Maria Tedesco, an executive vice president and director of retail at Charter One, said it has hired a number of business bankers to help gather small-business accounts. "We are about four times as large as our nearest competitor in Small Business Administration loans" in terms of number of loans, and twice as large in terms of volume, she said; Nat City is the nearest competitor.
Mr. Raskind of Nat City acknowledged that Charter One has broadened its offerings to include small-business. However, he said that Charter One would seek SBA guarantees on some types of credit and transactions that Nat City would not.
"Our goal hasn't explicitly been to be No. 1 but to use the program as it is intended to use," he said.
