M&I acquisition creates opportunity for others to gain market share
While economic conditions improved significantly in 2010, commercial lending has been slow to recover, many Wisconsin bankers say.
The recent biannual Bank CEO Economic Conditions Survey issued by the Wisconsin Bankers Association, says the current economic climate is not causing a significant increase in loan demand.
About 76 percent of the 106 bank executives who completed the survey said that the state’s economy is rebounding from the bottom. However, 92 percent said current economic conditions are fair or poor. The WBA said the rating of economic conditions is the lowest since it began the survey in 2004.
“Bankers are kind of contradictory right now,” said Kurt Bauer, president and CEO of the WBA. “They’re optimistic about the first six months (of 2011), indicating that we’ve hit rock bottom and the economy is growing. But most say that demand for commercial loans is poor, and most don’t predict it to grow substantially for the first six months of the year.”
Despite that low demand reported by commercial bankers, the commercial lending market in metro Milwaukee is going to be even more competitive than normal this year.
In mid December, BMO Financial Group, the Canadian corporate parent of Chicago-based Harris Bank, announced that it had reached terms to acquire Milwaukee’s Marshall & Ilsley Corp., the parent of M&I Bank. The transaction is expected to close by the end of July.
M&I is the largest bank based in Wisconsin, and is one of the largest, if not the largest, lenders to businesses in metro Milwaukee. Because one of the largest commercial lenders within that market will be in transition for much of 2011, many of its competitors will seek to gain market share.
Bill Bertha, Wisconsin market president for Minneapolis-based U.S. Bank, said his commercial lenders will “absolutely” be pursuing M&I’s customers, and that they had been doing so for several years.
“A lot of companies have already migrated their accounts to U.S. Bank,” Bertha said. “The team here is aggressively calling throughout the state. We look forward to growing our market share as a normal course of business.”
Green Bay-based Associated Bank has worked over the last 12 months to expand its presence in commercial lending in southeastern Wisconsin and Chicago, and the bank is now actively working to capture M&I’s market share, said Mark Sander, executive vice president of commercial banking.
“M&I has been in a leading market position for some time, and any time a leader has an event like this there is some disruption and opportunity,” he said. “We think we’re really well positioned and this should help. This is a better opportunity to talk with prospects and their clients than we’ve ever had in the past.”
Jim Popp, Wisconsin and Minnesota market president for JPMorgan Chase, said while there is an opportunity for his bank to take some of M&I’s market share, the bank will not be changing how it does business.
“Turmoil in the market creates opportunity,” he said. “We will continue to do exactly the same thing we’ve always done – finding and keeping in touch with the best companies, regardless of who their bank is.”
Smaller banks like Brown Deer-based Bank Mutual are also looking to capitalize on M&I’s turmoil. Bank Mutual is now working to increase its commercial lending presence, and views the acquisition by BMO as a significant opportunity, said David Baumgarten, president of the bank.
“Bank Mutual should benefit from this because we have such a small share today in the middle market,” he said. “We don’t have people that are unhappy with us because we don’t have people in that market. I’m looking at this as the glass being clearly half full rather than half empty in the opportunities we have to take this sense of frustration with (customers’) existing bank mindset that pervades the market today.”
However, Ann Benschoter, executive vice president of commercial banking for M&I, said the bank believes it will retain current clients, and even win new clients, by sticking to what it has always done.
“One of our hallmarks is the consistency with which we manage our customer relationships,” she said. “Are we concerned about customer retention? That’s first and foremost for us all the time. Does it surprise us that our competition would think about attempting to use it as leverage? It happens in any business.”
The Milwaukee banking environment is highly competitive, but it has been that way for decades, Popp said. While M&I being acquired presents an opportunity, he does not think many banks will change their approach.
“This is a great market. Part of the reason that so many banks eye Wisconsin now is that it’s a stable market,” Popp said. “Quality and safety and being a good solid business is now back in vogue. That’s what people recognize in this market.”
The marketplace has improved in the last six months, most bankers say, and will continue to slowly improve through 2011.
“As the economy continues to improve, and I think it (will), and as companies’ financial positions continue to improve, CEOs will have better visibility on the future and will feel better about their own growth prospects,” Bertha said. “As a result, we’ll see more acquisitions and organic growth. And at some point, they’ll start borrowing again.”
Lou Banach, senior vice president of commercial banking in southeastern Wisconsin for Associated Bank, agreed.
“There is an increase (in loan demand),” he said. “Is it robust? No. But there is a steady uptick.”
