Looking for growth opportunities outside recession-weary New England, Shawmut National Corp. is dipping a toe into the turbulent waters of nationwide corporate lending.
Shawmut has historically focused on retail and middle-market lending in its home region. But the company, jointly based in Hartford, Conn., and Boston, this year created a national banking group, eager to make loans and sell fee-based services to corporations in select industries.
The 60-member team is headed by Peter H. Conze Jr., a seasoned commercial banker whom Shawmut lured in June from Mellon Bank Corp.
Mr. Conze, an executive vice president, is charged with helping New England's third-largest banking company enter a cutthroat business at an extremely difficult time. Loan demand remains weak in many regions across the nation, and lenders are aggressively lowering borrowing rates to nab customers.
Some industry watchers and bankers warn that credit standards also are being compromised in the rush for new corporate business.
Executives at the $25 billion-asset Shawmut, however, argue that they have been opportunistic in entering the market now. Many money-center banks that dominated the corporate loan market have reduced their activity over the past few years, focusing instead on cleaning up their balance sheets.
That creates an opportunity for banks like Shawmut to diversify their loan portfolios by customer type and geography, according to the bank's executives.
"We are trying to leverage the corporate banking business that was part of Shawmut's activity in the lower New England states and deploy it outside those borders," Mr. Conze said. To do that, Shawmut will "focus more on individual industries rather than the general corporate market."
Shawmut has divided its national banking group into six industry-specific teams: specialty and large retailers; sports franchises; food, retail, and beverages; electronics, aerospace, and defense; chemicals and pharmaceuticals; and natural resources and utilities.
The specialized approach, which Mr. Conze also used at Mellon, is more common among established lenders than it is at bank companies of Shawmut's size.
Mr. Conze said the similar structure is totally intentional.
"We have to develop our business in these units as rapidly as we can and emulate other regional and superregional banks that have larger lending portfolios," he said.
While Shawmut's national banking group is competing against a wide range of institutions, from money-center to foreign banks, its primary competitors remain its traditional rivals: Bank of Boston Corp. and Fleet Financial Group.
Observers say that Shawmut is particularly interested in taking in nibble at Bank of Boston's powerful corporate lending machine -- at a time when the Boston bank is making incursions into Shawmut's pockets of strength in retail and small-business banking.
Bank of Boston, which says it is the nation's eight-largest commercial lender, last year announced a new emphasis on those sectors.
Executives at Bank of Boston are undaunted by the move of its rival
"If they are trying to get back at us, it's going to take them a decade," said Kevin J. Mulvaney, the group executive in charge of Bank of Boston's national banking group. "When dealing with specialized industries, the banks that are rewarded are those that have long, committed records in those industries."
Areas of Expertise
Bank of Boston has special expertise, he added, in media and communications, high technology, and transportation -- sectors conspicuously absent from Shawmut's menu.
"You can't just pop in and out of those industries," Mr. Mulvaney said.
Even Mr. Conze admits it will take a long time for his national banking group, which has built a portfolio of $1.8 billion of credits, to make its mark. But he insists that Shawmut is serious about the business.
The bank will add three people to its Boston-based corporate loan staff by the end of the year and is shooting for a $3 billion portfolio by the end of 1994. It also is building a loan syndication team based in Stamford, Conn., headed by Peter Farnsworth, formerly of Chemical Banking Corp.
"I'm hopeful but realistic," the 49-year-old Mr. Conze said. "It's going to take a minumum of 18 months to make a significant impact on the marketplace."
Indeed, Shawmut has yet to nail the lead lender, or agent, spot on a major credit outside of New England.
On its home turf, the bank has led credits to several sports franchises, including the New England Patriots and the Boston Bruins. But its national effort has thus far been limited to buying participations in loans originated by larger players.
Mr. Conze said he is aiming for Shawmut to emerge as a lead lender on a shared credit by the end of next year.
Observers Applaud Move
Analysts are generally in favor of Shawmut's effort to diversify its lending activities.
"I don't know how much incremental earnings it will bring to the company," said Thomas Theurkauf, an analyst at Keefe, Bruyette & Woods Inc. "But there is room for it on their balance sheet, and they have the personnel to pull it off."
Mr. Theurkauf noted that Shawmut in recent years has hired several executive with strong credit backgrounds who are well qualified to keep the national lending program under control. For example, he cited David Eyles, Shawmut's vice chairman and chief credit policy officer, who also joined the company from Mellon.
Mr. Conze stressed that Shawmut is hawking more than just loans to the corporate market.
Pushing Other Products
Cross-selling is an important part of the strategy, he said, noting the bank's attempt to also sell cash management, trade finance, and investment management services to is national clients. Shawmut already prides itself on its wide national roster of insurance industry clients to whom it provides these services.
The relationship banking approach is crucial to the lending effort, Mr. Conze said. The more ties Shawmut has to a corporation, the more likely it is that the company will tap the bank to lead a loan.
The new Shawmut banker again emphasizes, however, that such relationships don't grow overnight.
"There is a tremendous amount of homework one has to do to appreciate all of a company's needs," Mr. Conze said. "It takes a while to familiarize yourself with people at a company."