Local banks prepare for an influx of out-of-state competition
William Pack
Express-News Business Writer
Web Posted: 02/16/2005 01:52 PM CST
With Texas' banking environment attracting a crowd, local lending institutions say they have no intention of being left in the dust.
One banking giant — Wachovia — already is pushing its way into the marketplace, and the world's largest financial services institution, Citigroup Inc., has its eyes on San Antonio after getting a foothold in Texas last year through the acquisition of Bryan-based First American Bank.
Major out-of-state banks already operating in Texas, such as Bank of America, Wells Fargo and the soon-to-be-consolidated JP Morgan Chase and Bank One, are gearing up with more branches and refined services to grab a larger chunk of the area's banking dollar, too.
Bring it on, say leaders of some of the smaller, local and regional lending institutions. They are banking on records of proven performance to give them a shot to prosper in what generally is seen as an improving economy.
"We feel we understand our economy and its needs," said Jim Goudge, chairman and CEO of Broadway Bank, a midsize institution with about $1.5 billion in assets. "We will have to work harder, but there is still opportunity for a bank our size that offers high-quality service to our customers."
Dick Evans, chairman of Cullen/Frost Bankers Inc., said the banking industry has dealt with hefty competition since the mid-'80s and the competition has made Cullen/Frost, the parent company of Frost Bank, and other lenders stronger.
"We have grown well in that environment," said Evans, whose company boasts assets of nearly $10 billion. "There's no reason it can't continue."
Scott Alaniz, a Texas banking analyst with Sandler O'Neill & Partners, said community and regional banks will have to operate leaner to compete with deep-pocketed megabanks. But he believes the major locally based banks have tried to stay ahead of the curve in areas including management capabilities and branch siting. As a result, they should prosper as the economy grows.
The local institutions also have what amounts to a home field advantage in that they already are known in the market and see San Antonio as their focus area, not a satellite operation, Alaniz said.
"These banks have the ability to compete," he said.
Leaders of two major credit unions in San Antonio also are optimistic about their prospects because of the economy's strength and the expertise they have gained in serving specific sectors.
Jack Worthington, a senior vice president with Security Service Federal Credit Union, said auto lending is that company's core competency, generating a volume unsurpassed in San Antonio. He expects that sector to stay strong in 2005.
Home sales may weaken as interest rates grow, but not enough to be a problem, Worthington added.
"We are optimistic about our ability to maintain a continuing share of the market," he said.
Jeff Farver, CEO of San Antonio Federal Credit Union, said his company should win its share of the consumer lending market because of its commitment to prices that undercut those charged by bigger banks.
The company also is expanding its product lines into potentially lucrative areas — loans for manufactured homes and Internet-based customer financing options for smaller retailers.
Though two new San Antonio Federal branch sites will be opened this year, Farver recognizes the institution will have to operate more austerely until low interest loans are retired and replaced with loans drawing higher interest. Still, he feels good about the company's growth in 2005.
But it will have to come alongside the continued expansion of the giant banking institutions.
Wachovia, the nation's fifth-largest bank, opened its first San Antonio office last month and has plans for about four more in the area this year. Chase, which became the nation's second-largest banking company after its consolidation with Bank One Corp. last year, is planning on adding 30 branches across Texas this year, two in San Antonio.
Bank of America, which already has the largest number of branches in the metropolitan area, 30, has two or three more being planned for 2005, said Kenny Wilson, the bank's San Antonio president. Though some worry about the state hitting a saturation point for banking operations, Wilson is not one.
"All I know is we are continuing to grow," he said.
In steady San Antonio, where Bank of America has beefed up its small-business operations, Wilson sees more of the same this year.
