With 67,000 Travelers Group insurance agents set to peddle Citibank products, community banks could face an even more formidable foe in Citigroup.

"The notion of a combined entity with that much horsepower is somewhat overwhelming," said William A. Donius, president of $190 million-asset Pulaski Bank, St. Louis.

Citicorp and Travelers Group announced their merger plan Monday. And while Citigroup, the proposed successor company, has not outlined a plan of attack for acquiring community bank customers, it clearly intends to exploit its potent sales force.

"Travelers has been terrific at personal selling, and we will take advantage of that," said John M. Morris, a Citicorp spokesman. "Do we think we will displace all the community banks in the world? Of course not. But we will compete for that middle-class customer."

Like local bankers, insurance agents are close to their customers, observed Chuck Doyle, chairman of $216 million-asset Texas First Bank, Texas City.

If Travelers agents start selling Citibank services, Mr. Doyle said, he fears losing a major advantage community banks have over big out-of-state banking companies. What's more, he said, the larger competitor may be willing to cut prices in order to attract business.

"This merger definitely raises a caution flag," Mr. Doyle said. "It means that community banks could be entering a new danger zone with all sorts of new competition."

Richard L. Levin, president of $53 million-asset Normandy Bank, St. Louis, said he is concerned that a company the size of Citigroup-with $698 billion of assets-may not be held to the same rules his $53 million-asset bank must follow.

"If we make bad loans, we have to take care of those loans," Mr. Levin said. "I am concerned this is an entity too big to control, and I don't like the idea of not being on an equal footing."

The blockbuster deal could change the rules for all competitors, predicted Peter F. Stanton, chairman, president and chief executive of Washington Trust Bank, a $1.4 billion-asset institution in Spokane.

The Citigroup merger could force legislators to revise the outdated laws governing the industry, he said.

"The Glass-Steagall walls have needed to come down for a long time, and I salute them for that," Mr. Stanton said. "I am not afraid of competing with them. I just want the same ammunition that they have when I go into battle."

Still, others are unfazed.

"I don't think this merger means a thing to community banks," said Richard A. Soukup, a partner in Grant Thornton LLP, Chicago. "Citibank was so big it was off their radar screens already."

W. Page Ogden, president and chief executive officer of $170 million- asset Britton & Koontz First National Bank, Natchez, Miss., agreed. "I don't think this merger will cause any immediate concern for us in Natchez," he said.

Even if a Citigroup sends its agents chasing after his small-business customers, Mr. Ogden said, he believes they will still be selling "paint- by-number" loan packages put together elsewhere, not the customized loans his bank offers.

And the agents would still need to learn how to sell banking products, he added.

"Community banks are finding as we get into insurance that we have to hire people trained to do the job," Mr. Ogden said. "It is a very different business, and it can be tough to adjust. I am not sure that Travelers agents, or any agents, have the skills needed to be good lenders."

But even those who are confident they can go toe-to-toe with Citigroup have sympathy for the smallest of their peers.

Ken Van Kekerix, president of $270 million-asset United Bank, said he can compete if Citigroup comes to Ida Grove, Iowa. But he added, "If I was a $20 million-asset bank located next to a Travelers office, I would be staying up nights."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.