The questions "How do you make love to a porcupine?" and "How do you sell correspondent services to banks you compete with every day?" get the same answer: "Very carefully."
This was made obvious when I had breakfast with Earl D. Mohr, senior vice president in the correspondent department of Charlotte, N.C.-based First Union Corp.
Mr. Mohr's department serves about 400 banks, thrifts, and credit unions-most of which compete with First Union for the same types of business. How does First Union do it?
"Trust, trust, and trust," Mr. Mohr explains.
"If we go in to take on an overline, the bank is 100% certain we are not going to try to steal other business or take more of the participation than we are offered. If we are asked to help with a credit, and we find we already are doing business with that customer, we tell the respondent bank immediately and we bow out of the deal if necessary, to protect our image.
"Besides, most of the time, what the respondents want are services like cash management, clearing, operation, custody, international transfers, and risk management-services they can not provide for themselves, so there is no competition involved."
Correspondent banking is changing, however.
The days when the respondent was offered interest-free demand balances in giant quantities to pay for clearing, overlines, participations-not to mention advice and theater tickets-are over. (There was a time when correspondent bankers prayed that their local team would not win a pennant or otherwise be in a championship game, as the requests for tickets would overwhelm them.)
Now the business is about operations, international transfers, derivatives-to make sure the respondent is not put at interest rate risk by a loan custody-and, of course, taking part of credits that exceed what the smaller bank can handle.
To keep up, Mr. Mohr is taking classes in such areas as computer-driven service provision, to supplement what he has learned in more than two decades as a correspondent banker at Chase Manhattan Corp., First Fidelity Co., and now First Union.
"Who are your competitors?" I asked.
Mr. Mohr did not mention any New York money-center banks, even though he stressed that it takes critical mass to offer the array of services needed to compete in correspondent banking. But his references to the Federal Reserve were numerous. He acknowledged that one of his hardest jobs is to convince customer banks and thrifts that the Fed is not giving anything away, and that his bank can compete to provide services on a head-to-head cost basis.
To develop clients' trust and understand their needs, Mr. Mohr spends nearly half his time traveling, trying to sell First Union as a friend. That means visiting bankers who may look out their windows every day and see First Union's green sign on the bank across the street.
Still, he doesn't travel like he used to. Today he travels mainly to banks within driving distance.
"I can't justify $1,800 for a trip to Phoenix for a meeting," he said. "It's just too expensive. Even if I go to Charlotte for the day, it's close to $800."
Mr. Mohr said First Union's acquisition of his previous bank was a win- win situation. His new owners have the resources to provide modern operations plus full investment banking services-as First Fidelity could not. Yet he still has the freedom to run his operation with his management's confidence, going to Charlotte only about 10 times a year, mostly for training in new services.
It was obvious to me that he has the authority to run his shop as he likes, and make the promises to respondent banks that are necessary in flexible, effective correspondent banking today.