Wachovia Corp., the latest banking company integrating a recent acquisition to play show-and-tell with Wall Street, outlined Friday how it plans to boost revenue from SouthTrust Corp. branches.
Benjamin P. Jenkins 3d, the head of Wachovia's consumer and commercial bank, told analysts that it expects revenue gains as it improves deposit and loan sales at SouthTrust branches, where, he said, sales production trails that of other branches. Wachovia, of Charlotte, acquired SouthTrust, of Birmingham, Ala., on Nov. 1 for $14.3 billion.
Mr. Jenkins, who spoke at the BancAnalysts Association of Boston conference Friday, did not quantify the potential gains. But G. Kennedy Thompson, Wachovia's chairman and chief executive, said recently that he thinks it can bring in an extra $175 million a year through productivity improvements at SouthTrust branches.
Branches have been an important factor in the overall growth at Wachovia. The $478 billion-asset company gets about 54% of its profits from its general bank, which serves retail and commercial customers.
The idea that large banking companies can reap benefits by improving sales at the branches they acquire was a recurring theme in Boston last week.
Bank of America Corp.'s retail banking chief, Liam McGee, told analysts at its own meeting in Boston on Wednesday that there is "dramatic upside" in former customers of FleetBoston Financial Corp., which B of A acquired April 1.
B of A introduced its own sales tactics and training programs at former Fleet branches in the spring and summer, and the moves are already producing results, he said.
A day later Charles W. Scharf, the head of retail financial services at J.P. Morgan Chase & Co., spoke at the BancAnalyst conference and talked about how he hopes to speed sales improvements in its retail branches by importing tactics from Bank One Corp., which JPMorgan Chase acquired July 1. Those tactics include adjusting branch compensation schemes to encourage a new sales culture, as well as putting a new emphasis on personal bankers and investment salespeople.
SouthTrust had been known for its strong sales culture, particularly in commercial lending. But on Friday, Mr. Jenkins said that it was less focused on deposits than Wachovia has been in recent years.
Deposit sales at SouthTrust branches equal only 30% of sales at Wachovia's other branches right now, he said, while retail loan sales equal just 22%, he said.
"We believe we can leverage that [production gap] across their entire footprint, and you'll see a nice pickup after we get the conversions done," Mr. Jenkins said.
A spokeswoman for Wachovia said Friday that it plans to change branch signs and computer systems early next summer in markets where the two companies' networks overlap, including the Carolinas, Florida, and Georgia. Conversions in the rest of SouthTrust's territory are planned for the fourth quarter of next year.
Wachovia will probably get at least some productivity gains through branch consolidations. It has said that during the SunTrust integration it expects to close 175 to 200 of the roughly 720 acquired branches. It also agreed to divest 18 branches in Georgia and Florida.
But Mr. Jenkins said Friday that most of the revenue gains would come from introducing Wachovia's "very disciplined sales processes" and products at the SouthTrust branches. He described how Wachovia closely tracks branch and employee performance and rewards good performance with bonuses. He also said his company may be able to learn a few lessons from SouthTrust, particularly in commercial real estate and commercial lending.
The success of Wachovia's last big purchase is proof that it can improve sales performance after an acquisition, Mr. Jenkins said.
In September 2001, the company then known as First Union Corp. bought the old Wachovia, of Winston-Salem, N.C., and took its name. Before the purchase, the old Wachovia's branches sold only about a quarter as much as First Union's branches. Three years later the old Wachovia branches are catching up - sales at those branches are now 69% of those at the First Union branches, even though their sales have also grown.
Jeff Davis, an analyst at First Horizon National Corp.'s FTN Midwest Research Securities Corp. in Nashville, said Wachovia might be able to take advantage of SouthTrust's traditional lack of focus on retail banking, which has begun to change only recently.
"SouthTrust was a commercial-focused bank first, and retail was secondary," Mr. Davis said Friday. "Over the last few years SouthTrust has made a push to change that."
Though he was somewhat surprised at the sales gap Mr. Jenkins described Friday, Mr. Davis said Wachovia could find room to build the former SouthTrust branches.
