Banks are giving customers cash, opening new branches and needling their competitors with advertising as they jockey for new customers amid the shakeup of the local banking scene.
KeyBank has added 1 million customers from First Niagara Bank across its four-state network, and Northwest Bank has acquired 18 other First Niagara branches in the region. Rival banks rarely see upheaval on this scale, so they're using a variety of tactics to swoop in to attract customers before things settle down.
• Banks have unleashed a wave of ads. Evans Bank, for instance, launched a digital billboard that said, "Local is Key, not the other way around," a dig at Key's out-of-town headquarters.
• They're running promotions, like the $160 M&T is offering certain customers who open a checking account or the $150 Five Star Bank is offering under a similar program.
• Some, like Evans and Five Star, are even opening new branches. A brand-new competitor, Bank on Buffalo, will open three branches.
Why the fierce competition?
There's a big opportunity. Consider what happened four years ago, when HSBC Bank USA finished selling its 195-location upstate branch network to First Niagara. M&T didn’t buy any of those branches. But by the time all the locations finished changing hands, M&T’s 2013 local deposit market share had increased by 8 percentage points from two years earlier, strengthening its No. 1 position.
“We can tell from the numbers when HSBC was sold to First Niagara, that one of the biggest winners from that transaction was M&T Bank,” said John Wilcox, a professor in SUNY Buffalo State's finance and economics department.
In the latest consolidation, M&T didn’t buy any First Niagara branches. But M&T's new-customer growth rate in the third quarter was still its best in the past eight quarters.
For all of the wrangling, one expert estimated only 10 percent of the acquired customers in the Key-First Niagara deal are truly up for grabs. But for banks, those customers are worth the fight.
Banks are striving to get their brands in front of customers, with a blitz of print, digital and broadcast ads and billboards.
“Right now, we are doing probably the most comprehensive campaign we have ever done,” said Kevin Brady, Evans' vice president of marketing.
Evans is also experimenting with a targeted marketing approach, aimed at reaching small business owners at their homes with digital ads.
Beyond ads, Evans sped up plans for its first Niagara County branch, opening a location last May in Lockport.
Citizens Bank's retail director for New York State, Lisa McGraw, noted plenty of customers underwent a bank switch just a few years ago with HSBC, and just endured another switch with First Niagara. “I think if I were a customer and I were going through my second change, it may make me think that I should look and see what else is there,” she said.
At the same time, the banks that made the deals — Key and Northwest — are determined to retain as much of their expanded customer base as possible, said Wilcox, who tracks the banking industry.
“Obviously, you want that to be 100 percent, and it never is,” Wilcox said. “But for a good bank with a lot of [branch] options, that number is going to be 90 or 95 percent. You’re really talking about fighting over 10 percent of the submarket.”
Cash an incentive for customers
M&T isn't taking its top ranking for granted. The bank has trumpeted its 160th anniversary with ads reminding customers of how long it has been based here. In August, M&T threw a public party on the plaza of its headquarters, complete with cake, a band, and tributes from elected leaders.
“Any time there’s disruption in banking and bank relationships, it’s a time for customers to think about what they want in the future and what they want their bank to look like,” said Neil Hosty, head of retail and business banking at M&T. “So we’ve definitely seen a significant increase in the number of new, prospective customers we’ve talked to."
Customers impacted by a merger react at different stages of the process, Hosty said. Some move their accounts before a deal is completed to get ahead of things. Others take action when the merger draws nearer and official materials arrive in the mailbox. Still others wait to see how an acquisition plays out before considering a change.
M&T is among the banks offering promotions to try to win more business. Customers who open a personal checking account with M&T by Nov. 30 and make a qualifying direct deposit account within 90 days will receive a $160 cash bonus.
Relatively smaller banks are eager to grab a bigger slice of the deposit pie, too. Fifteen banks with branches in the Buffalo Niagara region had a combined $42 billion in local deposits as of June 30, according to the Federal Deposit Insurance Corp. The newly combined Key-First Niagara accounted for about 27 percent of the share, good for second place. But that was still far behind the market’s leader: M&T Bank, at 55 percent.
Mergers push some customers to new banks
Wilcox said customers might be motivated to switch banks if they move to a place where their current bank doesn’t have a branch nearby, if at all. Others might switch prompted by a negative customer experience. And then there are customers who choose to make a change in light of a merger.
Kevin Calvello and his family had a long-time banking contact with an employee at HSBC, and they followed her to First Niagara. After she died, he felt like they no longer received the personalized service they enjoyed.
“Our demand and need for banking isn’t very high,” Calvello said. “But when things did arise, we really didn’t know where to go.”
When they learned their accounts were transferring from First Niagara to Northwest, a bank Calvello was unfamiliar with, he reached out to a contact at Evans.
Calvello and his father are co-owners of a small business, B&W Heat Treating in the Town of Tonawanda. Evans arranged a meeting for the Calvellos with the managers of the two branches closest to where they live and work.
“That was very nice of them to do that, to instantly have that point of contact and exchange business cards,” he said.
The families ended up moving their personal and business accounts to Evans, and Calvello credited Evans with helping them take care of the details of the transition.
Room for more growth
Other banks competing for customers are trying to make themselves as visible as possible, as well.
More than half of Citizens’ area branches are inside of Tops supermarkets, and the bank plays up its accessibility, McGraw said.
“People have the option to bank when it’s convenient for them, and they’re not trying to get to the bank when it’s convenient for us,” she said. “And we find customers really, really enjoy that.”
Five Star Bank already wanted to increase its presence in the Buffalo Niagara region. When the Key-First Niagara deal came along, Five Star accelerated its plans. Five Star expects to open its first-ever branch within the city of Buffalo – a former Key location at Fountain Plaza – in the next few months.
“We think it’s a perfect location, and a perfect time to be doing it,” said Martin K. Birmingham, president and CEO of Financial Institutions, Five Star’s Warsaw-based parent company.
Five Star has rolled out ads playing off the merger climate – in one TV commercial, a woman complains her bank handed her off like a football – and will run more ads in that vein. It's also offering a $150 bonus to customers who open a qualifying checking account and establish direct deposit by Dec. 31.
Five Star has less than 2 percent deposit market share in the combined Buffalo-Rochester markets. To Birmingham, that leaves ample room to grow: “You can imagine the financial impact to the extent we are modestly successful in taking advantage of these market opportunities."
Dunkirk-based Lake Shore Bancorp is also playing up its local connections and long history, since it is celebrating its 125th anniversary this year.
If all the jockeying isn’t enough, another contender is entering the picture. Bank on Buffalo, a division of Pennsylvania-based CNB Financial, plans to open three branches in the market. One of them has already debuted, only as a loan production office for now, at the Electric Tower.
So even if the big banking deals are complete, the quest for the customers continues.