In the latest makeover of its retail banking business, UnionBanCal Corp. of San Francisco has been putting managers much closer to the rank and file.
Under Tim Wennes, the former Countrywide Financial Corp. executive whom UnionBanCal hired in July of last year to head the retail business, the $68.7 billion-asset company has increased its roster of market presidents from three to five. Each president runs 70 branches, rather than 110 previously.
In addition, 30 regional managers now oversee a dozen branches each; a year ago 16 managers oversaw as many as 30 branches each.
"There's a huge change in the way we're managing the retail bank," said Philip Flynn, the vice chairman and chief operating officer of UnionBanCal and its Union Bank. "The big focus is to grow deposits," which rose 8% in the first quarter from a year earlier, to $48.9 billion.
Wennes was previously the president and chief operating officer at Countrywide's thrift, which eschewed traditional branch banking by offering high-interest deposits through low-cost channels like the Internet and the company's mortgage offices.
But before he joined Countrywide, Wennes worked for 14 years at Wells Fargo & Co., so his current job is a return to retail roots.
Increasing the number of top managers will create "more focus on the customer experience and the sales and service activities in our branches," Wennes said. "Our regional managers are able to be out in the branches more regularly and be closer to our bankers, our customers."
Dave Martin, a retail banking consultant at NCBS, a unit of SunTrust Banks Inc., said doubling the number of regional managers will mean "front-line folks who work with customers on a day-to-day basis are going to be heard more."
"You get less surprises that way," Martin said. "That being said, there is no magic about just having more people."
Flynn said UnionBanCal, a unit of Mitsubishi UFJ Financial Group Inc., has long been viewed as a business and commercial bank rather than a retail bank.
It has been trying to change that perception for years, and has fine-tuned its strategy a few times.
In 2004, UnionBanCal tested some elements of the model pioneered by Commerce Bancorp Inc. of Cherry Hill, N.J., by extending hours and adding televisions and coin counters in 26 branches in the Fresno market.
Three years later, UnionBanCal decided to narrow its retail efforts to focus on high-end customers and small businesses.
Today, UnionBanCal is "focused on serving everybody in the retail footprint, with an emphasis on areas where we can add value," Flynn said.
There is still "a lot of focus on the mass affluent … but with 350 branches, we do everything," he said.
The new retail management team, led by Wennes, is "bringing a much heavier emphasis on execution, the nuts and bolts of servicing customers well and cross-selling products," Flynn said.
In addition to Wennes, Union Bank also hired Pierre P. Habis, as head of branch banking and small-business banking in September 2008. He had been Countrywide's managing director of retail and commercial banking.
According to Flynn, Union Bank is the third-largest commercial bank in California by deposit share, behind Bank of America Corp. (which acquired Countrywide last year) and Wells Fargo.
Union Bank's commercial deposit business specializes in niche markets. It is the largest depository for title companies and has a large share of deposits from municipal and state governments, broker-dealers, grocery store chains and labor unions.
The real estate slump has hurt the title firms, and hence pinched Union Bank's commercial deposits.
In the first quarter its average no-interest deposits declined 1% from a year earlier, to $12.5 billion, as a drop in property sales reduced title and escrow deposits. However, average interest-bearing deposits climbed 10%, to $34 billion.
Union Bank is struggling with a ballooning portfolio of nonperforming commercial and industrial loans that analysts said resulted from a bad economy in the states where the bank operates: California, Oregon and Washington.
UnionBanCal lost $9.8 million last quarter after making $122.4 million a year earlier. The company's commercial and industrial nonperforming assets jumped fivefold in the first quarter, to $835 million, or 1.21% of total assets. Its commercial real estate and commercial and industrial nonperformers are evenly split.
"We and everybody are feeling the impact, because commercial real estate tends to be highly correlated to what's going on in unemployment," Flynn said. "It started 18 months ago with loans to real estate developers, but now the real estate downturn encompasses all classes, including real estate, office and industrial."
Analysts said that they have been surprised by the surge in problem loans given Union Bank's conservative underwriting guidelines, but that it has been aggressive in taking charges for nonperforming loans.
Net chargeoffs rose nearly tenfold in the first quarter, to $116 million, while the bank's provision for credit losses rose 243%, to $275 million.
"We've been significantly increasing our loan-loss reserves, but we haven't had a huge rise in losses," Flynn said. "Chargeoffs and losses are always at the tail end of these things."