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CITIZENS BANK AGGRESSIVE IN LENDING TO SMALL BUSINESS
BECOMES AREA LEADER IN QUANTITY OF LOANS

Citizens Financial Group hasn't wasted time making its mark.

Just a few months after acquiring Charter One Financial of Cleveland, the parent of Citizens Bank is aggressively following through on its commitment to become a major small business lender in upstate and Western New York.

Since taking over Charter One at the end of August, the company has more than quadrupled its lending sales force in the region and throughout the state, while organizing them into one of three specialized teams. It's instituted a more proactive sales and marketing culture. And it's now opening new offices dedicated to larger loans and relationships.

"That's Citizens' way of doing business," said Lyndon Matteson III, senior vice president and director of business banking for New York state at Citizens -- which for now is still operating locally as Charter One Bank. "Business banking is a primary focus for Citizens."

In the process, it's introduced a much wider array of products and services for businesses with $10 million or less in revenues. And it's rocketed into the top spot in Western New York for the most loans made through the U.S. Small Business Administration from October through March. In doing so, it overtook traditional leaders M&T Bank Corp. and HSBC Bank USA.

"We welcome them with open arms. They've done what they said they were going to do," said Frank Sciortino, director of the SBA's Buffalo District Office. "They have made an impression on the small business community in our area."

Its rapid rise is already an accomplishment for a bank new to the local market. And it comes despite Charter One's lack of business activity in the past and the challenge of Citizens having an unknown name here.

That's especially true since branches will still carry the Charter One name for several more weeks. As a result, businesses aren't yet likely to knock on the bank's doors without first being approached. And local competition isn't going to roll over.

"Over the years we've seen a number of competitors come and go in the marketplace," said C. Michael Zabel, spokesman for M&T, which has been the leading SBA lender in the market by dollar amount for more than 10 years. "We've been here consistently through the years. We think we'll continue to be successful there."

An HSBC spokeswoman declined to comment.

The business lending efforts are part of a larger series of changes under way as Citizens introduces itself to the Charter One market. Citizens, the Providence, R.I.-based subsidiary of Royal Bank of Scotland Group, paid $10.5 billion in cash last year to buy Charter One and expand into six new states.

Citizens, whose tag line is "not your typical bank," has cut back on marketing under the Charter One name. And it has begun using billboards and television advertising to familiarize Western New Yorkers with Citizens and tout itself as friendlier.

But the new business lending activity has been one of the biggest changes from the past. Originally a traditional thrift, Charter One had long focused on basic consumer deposit-taking and lending, not on businesses. It aggressively opened branches in supermarkets recently, but made only limited outreach to companies.

"We were very vanilla, very transaction-oriented," said Matteson, former retail banking manager here for Charter One. "We liked to take the mortgage and open the deposit account, but we didn't have a lot of specialized services that a small business owner could use."

By contrast, Citizens has a national reputation for small business banking, and is ranked as the No. 2 SBA lender nationwide, behind only Bank of America Corp. The SBA provides government guarantees for most of a qualifying loan up to $1 million. As a "preferred" SBA lender, the bank can approve SBA loans without first going through the agency.

From October through March, the bank made 218 SBA loans totaling $5.8 million in Western New York. While the dollar total was less than half the $12.1 million of M&T, it was more than HSBC's. And the total number of loans was triple that of both M&T and HSBC.

By comparison, for the year ended Sept. 30, 2003, Charter One made just three SBA loans, none in the first six months.

"They're really way ahead of the pack as far as loans made. That's very substantial," Sciortino said. "That's 218 loans we never had at the same time last year."

The bank also makes loans outside government-guaranteed programs. Besides loans, it offers foreign exchange, cash management, derivatives, government banking, international banking and equipment leasing -- none of which Charter One had. And it says it wants a customer's full relationship, not just one transaction here and there.

Charter One now has 16 business bankers in Western New York and 100 statewide, up from three and 25 when Citizens took over. Officials ultimately plan to have at least one business lender in each of the bank's 200 offices in the state.

Just last month, it named a new senior vice president and relationship manager director for business banking in New York, who will be based in Albany and report to Matteson. It also created a business banking center in Buffalo to reach out to potential clients and handle larger loans over $250,000.

The local unit, with five "relationship managers" led by Buffalo native Marytherese Hayes, is one of five in the state, and is based near the airport. Others are located in Rochester, Syracuse, Albany and Newburgh.

"That's just our starting point," Matteson said. "We want to do business with all businesses. We don't have a lot of restrictions."

Such change is especially thrilling for Matteson. He previously ran retail and commercial banking at KeyBank before he was brought into Charter One in 2000 to kick-start its business lending companywide.

"It's not only exciting, it's the opportunity of a lifetime," he said. "How many people get a chance to grow a line of business 300 percent in the first six months?"