Comerica Heads to Dallas

photography by Tadd Myers

For more than 150 years, Comerica Bank has been a Detroit institution. Founded in 1849 as the Detroit Savings Fund Institute, it took in $41 in deposits on its first day of business and has grown to manage more than $57 billion in assets. Today Comerica is the 25th-largest U.S. bank in consolidated assets with locations in Michigan, California, Florida, Arizona, and Texas. But with a suffering Detroit economy—caused in large part by a declining auto industry—and much of Comerica’s growth happening outside of Michigan, the time was right for a major change.

In March, Comerica executives announced what they had privately been working on for months: a corporate headquarters relocation to Dallas, a city that was built on banks but currently has no major financial institutions based here. Led by Comerica-Texas Chief Executive Chuck Gummer, Comerica has had a strong presence in Dallas for nearly 20 years, with 72 banking centers in Texas.

Upon the announcement, Comerica Chairman and Chief Executive Officer Ralph W. Babb Jr. said of the move, “Over the past three years, we have been advancing our strategy to diversify our customer base and extend Comerica’s reach into key high-growth markets. Today, a significant percentage of Comerica’s earnings is generated in the Texas, Arizona, California, and Florida markets. Moving our corporate headquarters to Dallas will give us greater proximity to all of our markets, and the additional resources in these markets will lead to accelerated growth for Comerica. In addition, the vibrant and diversified economies of Dallas, Houston, and Austin will be particularly helpful to Comerica as we seek to continue attracting and retaining talented employees.”

DallasCEO invited Babb and Gummer to discuss their upcoming move, which is expected to take effect by the end of the third quarter 2007, with several local experts on banking and the city of Dallas: discussion moderator Ron Steinhart, retired chairman of the commercial banking group for Bank One Corporation and former chairman of the Dallas Citizens Council; Charles H. Pistor Jr., former chairman and CEO of RepublicBankDallas and former president of the American Bankers Association; and Erle Nye, chairman emeritus of TXU Corporation and former chairman of the Greater Dallas Chamber of Commerce. (For a full transcript, click here.)
 
Ron Steinhart: First on behalf of us, we want to welcome you, Ralph. We’ve known Chuck since he first put your flag up here in our community, and he’s been a great citizen of Dallas. And your bank has done a great job of building up from what was Grand Bank, but it’s good to welcome you also.

All of us have been very involved in the community, so from that angle we’re happy to participate [in this roundtable]. And a couple of us have been involved in the banking business, so we feel somewhat of an identity with another banking organization. So it’s good to get together. I thought we’d start out with Erle getting it going with one question, and go free with it from there.

Erle Nye: I know there are many, many factors that are taken into account when you decide to move a corporation as large as yours, and it must pull you and tug you in different directions. But from the point of view of all the factors that you must have considered, to what extent did the quality of life and the economic growth in Dallas and the region attract you here?

Ralph W. Babb Jr.: Well, it was very important. … Other things we looked at were the number of headquarters that are here, which is outstanding when you look at the number, when you look at the almost trillion-dollar economy being the 8th largest in the world and the growth you went through.

When you look at other things besides the great economy here and the great growth, look at the population growth. Thirty percent of the population is projected to be in three states by 2030, and this happens to be one of those states, as are Florida and California. So it’s our opinion that the population growth is going to dictate the economic growth. Per capita income used to be a bigger dictator than it is today.

So when you wrap all that together, it became a natural next step in our expansion because we really want to grow the corporation quickly. We’re committed here, we want to grow it faster than we had originally planned to do here, and we will continue to grow the other markets as well.

Steinhart: The last position I had with Bank One was running the commercial banking across the country, and the Central time zone and this airport really made it easier. Literally, from time to time if my schedule required it, I’d make day trips that you could do from here that you couldn’t make from the East Coast or West Coast.

Charles H. Pistor Jr.: To piggyback a little bit on what Ron [is] saying, the economic engine that the DFW Airport has been—we’ve all talked about this so much it probably doesn’t need to be restated, but it just cannot ever be underestimated. The “air is our ocean” kind of moniker we had when we first opened up DFW. It was unbelievable—an airport as large as Manhattan, it just was sort of mind-boggling to people and yet it’s paid off. For those of us who were privileged to be a part of that national sales effort recruiting companies and their branches and so forth in here, that was so exciting. Success begets success, so from the Comerica move, we’ll undoubtedly see some other people start to think more vividly than they did in the past about the advantages of a move.

I guess I would pose the question, picking up on Ron’s thought about a banking question: Every time you turn around, there’s another bank coming in. … [W]hat will Comerica see as its hallmarks to differentiate itself?

Chuck Gummer: First of all, we have really seen ourselves as not trying to be the mass-retail bank that we see from others. We’ve really identified the crossroads of businesses and mass-affluent. And that’s where we see our niche. And in fact at the very beginning, we started off with a mission wanting to be the business bank of choice for owner-managed businesses, so we even took yet another step and said we really want to be for the entrepreneur and be the best bank there and develop that.

And for a whole host of reasons, but most importantly, because it was our people competing against someone else’s people, [it was important] to be able to be successful. Not how many dollars were spent here or how many locations we may have had, but just our folks against somebody else’s. So we knew if we had the best people that were trained the best and had the best support, we had a chance of winning.

And then the other part of what we do in terms of all that, is the relationship side of banking, which a lot of people talk about, we recognize that, but it’s just like at a football game: The plays aren’t all that much different, it’s the execution of those plays. And that’s really where we look to be able to make sure we execute better.

Steinhart: I think today, especially with all of us being with major organizations in the past, we can appreciate that on one side we have an obligation to shareholders. Some people say, “Well in the old times the bankers would spend all afternoon on the community, funding everything.” And we realize that in today’s world, there are pressures—and rightfully so—that shareholders expect returns. … I’d like to hear your thoughts a bit on that balance between obligation to shareholders and obligation to community.

THE PANEL: (From left to right) Charles H. Pistor Jr., Chuck Gummer, Erle Nye, and moderator Ron Steinhart. photography by Tadd Myers

Babb: Obviously the shareholder is no. 1. And you have to do what’s right for the shareholder going forward. But being involved in the community is also good for the shareholder because that means it’s part of developing the relationships. Members of the community attract business from a selfish standpoint.

At the same time, you’re giving back to the community, which makes the community healthier and stronger. The better the community is, and the faster-growing a community is, the better the institution is. A bank really is a microcosm of the communities that it serves. And so it’s a win-win from that particular perspective.

Nye: There’s a rumor—of course you guys have always been downtown, and you’ve had a presence downtown—there’s a rumor that you might be willing to locate downtown. And I guess I’d ask two questions: Can you tell us where [the new headquarters is] going to be, and number two, to what extent is that rumor right, and if that rumor is right, to what extent do these peripheral kinds of things have to do with your location?

Babb: We have not made a final decision yet. We are actively looking. Top of the list is the city and downtown. We’ve been here for a long time, and we think that’s important. And we’d like to continue that.

Steinhart: Let’s talk a little bit about Comerica the organization today. A couple of us were in [the industry] for a long period of time, and the business has changed. You’re a much larger organization today. You came here with a really defined niche and did really well in it. But one of the things you find as you get larger is you look for other sources of income and diversification. Tell us a little bit about Comerica going forward, and at the size you are today, all the way from acquisitions to products and services, what do you see?

Babb: Our top strategies were first to expand in our fast-growth markets and we’ve talked about that this morning. Texas certainly is right at the top of the list with California and the other markets that I mentioned.

The other is we were, and have been, known as a very relationship-focused business bank, which Chuck described very well. We also have a strategy to expand in the retail. I think some of you know Connie Beck, who we brought in to head up our retail organization, and she is doing an excellent job. Dennis Mooradian, we brought in to head up our wealth and institutional management, and we’re looking to balance those businesses. Because the key is with a small- or middle-market company, we want to have the products and services to leverage not only the management, the ownership, but also the employees. Bank At Work is a big product for us.

Today wealth management is easier to go at because it’s a very open architecture. When we’re talking with you, we need to bring you the best products. If we don’t manufacture it, that doesn’t matter to you as long as we go out and get it and bring it to you. That’s oversimplifying it but that’s important.

Retail [is also important] because we need these locations that Chuck was talking about. When we look for locations, it’s more hub-and-spoke of looking for where would you put a small bank today, because, as we talked about, our culture is really to be a small bank even though we’ve gotten bigger.

Pistor: I’m going to roll into another business question. A long time ago in a different context, I used to make the comment that we bankers were pretty good bankers, but we weren’t very good businessmen. What I was meaning about that was—things have dramatically changed since then—but we tended to look internally to our competition being our same commercial banking folks too much and not about either the other financial service vendors or individual banks and what they were planning to do.

The competition now takes so many different forms. Because banks are now better-equipped as has already been said with powers, positions, places, prices, so we’re not nearly as narrow as we used to be. But within that context I guess my question is who do you see as the competition today, and maybe more importantly, who do you see as the competition to Comerica tomorrow?

Babb: I think things are changing very rapidly as you mentioned. As long as I can remember, it’s always been that way. It’s been that the new competitor is out there. It’s not just banks. There is a liquidity today that is probably as high as I’ve ever seen it and it comes from a number of different places. You mentioned foreign banks but there’s also funds and there’s investment banks, and I think that just continues.

I think the key and the focus as you look at all of the various competitors as they develop gets back to what Chuck said earlier, and that is the relationship. And I believe that will always differentiate us.

Today if you look at the surveys, location is still 50 percent of the decision for the retail customer to open their account. But they still want to know a person even though they may not come back in for a while because they use Web banking or they use Comerica Central or whatever. But when they want to do banking in business, they want to call someone they know. And that means a trusted person. I think that’s the thing we will keep our eye on going forward.

Nye: Ralph, as the only non-banker in the crowd, I guess I need to probably settle to the side here someplace. All of my friends who are not in the business are fascinated, and maybe this is only in Texas but I suspect it’s in other places, at the proliferation of start-up banks. The story has been said that every time a service station closes in Dallas, a bank opens. But that trend can’t go on forever. Those banks must face a serious challenge of providing the breadth of services that so many people want. But there is this phenomenon going on. What do you predict in that respect? How long will that trend continue?

Babb: That’s been going on ever since I’ve been banking. If I remember the numbers right, in the United States we’re net down a little bit from where we used to be at one time actually, but not a lot.

And it’s not unusual to see that. Some grow and survive and turn into larger, stronger banks. Others are acquired at some point in the future, but that’s been going on ever since I can remember and I don’t see it changing.

I think you see more in Texas. If I remember the numbers right, I think Texas has twice as many banks as California. I read that in an article the other day. And it’s because of what you were talking about.

Steinhart: A lot of that goes back to that we didn’t get branch banking until ’86. So you had unit banks formed everywhere.

Gummer: But I think it does speak to the entrepreneurial flare of the folks here in Texas, and lots of people like to say they own a bank or own part of a bank. They may be less concerned about how much they’re making on it as much as they’re able to say they own part of a bank.

Steinhart: Like a racehorse.

Babb: That is competition but it’s also a customer. We do a lot of correspondent banking. And that’s an important product/service that we provide and we very much like to provide that.
Steinhart: You’ve done a great job over this 20-year period of building up a bank with a lot of expertise in size and market reputation. With your move of corporate headquarters here, would you see any more increased appetite for a little more rapid expansion of banking centers or would you see an increased appetite that you might be a little more interested in acquisition here or there to accelerate your growth?

Babb: Let me talk about the banking centers first. We will accelerate the expansion. One of the big reasons for moving, or the big reason for moving, was to accelerate growth—to team up with Chuck and the team here, and to expand quicker here than we had originally laid down in our plans. So the answer to that is yes.

We’re always interested in looking for potential acquisitions. The key for us is we have been ramping up this internal model, and as you all know, when you start that, it takes a while for things to pay back. And even when they begin to pay back, we’re not letting that fall down at the moment because we’ve been ramping up the number of locations that we’re doing, which means more people and more investment each year. That’s what I refer to as the “grit your teeth” period of investment for the future. And an acquisition has to get us there quicker in the locations that we want to be, as Chuck mentioned, but not take us off that internal engine, which, for the future, is the most important one in my opinion.

So it will be a combination, if we find those that fit that and of course the price and everything that you go through, then we’re always very interested in acquisitions in the markets where we are that move us out there that much faster.

Pistor: Erle made a comment earlier that caused me to think about one thing and I’m sure you have heard from Chuck as he’s been involved right in the core of the community—Dallas is unusual in that it does not take lightly dealing with five layers down, so to speak, in an organization if you wanted to have participation. It tends to be right up at the peer level with the CEOs. And I think the companies that have been somewhat disappointing to me, of course they’re few in number, but [they are] when the CEO just detaches himself, doesn’t want to be a part of this community and puts it down to the vice president of community affairs or something like that.

Dallas itself has this culture of dealing right at the top of their citizens council where these guys have been, and Chuck’s been, and so forth. But we used the word earlier, the “tone at the top” continues to be a hallmark of our business community. This community wants to see that tone at the top and that’s what Chuck’s done so well for us.

Steinhart: Another big thing about this community that will be real positive with your move, and Chuck’s a good example, as I am. Chuck came here 20 years ago. I came to this community 40-some odd years ago, never lived here before. It’s a very accepting people. It’s not one in which you’ve got to earn your spurs and you can’t do anything of importance until you’ve been there 10 or 15 years. It’s very accepting of business people. It’s got a very pro-business attitude. Chuck’s got more opportunities to play a leadership role than he’s got time, and that was from day one. “New kid on the block” doesn’t mean anything. And I think that’s always good to an executive team and new people in town, whether it’s a spouse that wants to get involved in something or the employee who has an interest in certain areas. That person’s going to have a meaningful opportunity very quickly and that’s much different than a lot of communities. So I think that will be a big plus for your move here.

Pistor: I want to share with you a real fast, but I think funny, personal, true story that illustrates Ron’s point so well. Years ago we were fortunate in Dallas to have the relocation of the National Gypsum out of Buffalo headquarters down here, and I remember talking to the CEO and saying, “You know there is this culture in Dallas of wanting to know [what’s happening], both in the city and business. I want you to come over and I want to set up a cup of coffee with the city manager, George Schrader.” And George was a fantastically good city manager for Dallas. And we went in and he just put his arms us, and said, “We’re so excited to have you here, and I want to know anything I can do from the city’s point of view.” Anyway, it was a great visit and we came out, and the CEO said to me, “Hell, in Buffalo they don’t even know we exist, and here I’m meeting with the city manager the first day!”

Babb: I have to say, when I met with the governor, the same thing—the excitement, the pride of what was going on here in Texas and the desire to attract to Texas. I talked to the mayor on the phone and the same thing, very excited about the opportunity, very supportive, and then of course [State Representative] Dan Branch and others, Mike Rosa [with the Greater Dallas Chamber] and all were very much involved as we were going through the decision process. I can’t say enough good things about them all from the standpoint of the support and the excitement and the enthusiasm that they all showed.

Milestones in Dallas Banking History

Dallas and the banking industry have matured with—and some might say because of—one another. By Trey Garrison

1868
William H. Gaston and Aaron C. Camp partner to form Gaston and Camp Bank of Dallas, the first permanent bank in Dallas. The bank will go on to become the National Exchange Bank of Dallas.

1869
The Reconstruction government of Texas changes the prohibition against chartered banks in the Constitution. State banks, national banks, and private banks flourish, with private banks dominating the market.

1897
As director of the Exchange Bank of Dallas, Nathan Adams, a former clerk, expands the bank, especially after acquiring the Mercantile National Bank.

1900
The Exchange Bank merges with the National Bank of Dallas. The new firm acquires the American National Bank (1905) and the City National Bank (1929). After 1929 it is known as the First National Bank of Dallas.

1907
The Dallas Morning News campaigns for a depositors’ guaranty-fund law. In 1909 a special session of the legislature approves one.

1914
Dallas is selected as the location for a new Federal Reserve Bank, one of 12 chartered by the Federal Reserve Act, assuring Dallas’ status as a financial center.

1916
Robert Lee Thornton establishes Stiles, Thornton, and Lund, a private banking house. Within a year it becomes the Dallas County State Bank, which during the Great Depression becomes a national bank, the Mercantile. Thornton serves as president from 1916 to 1947.

1920
Republic Bank is founded in Dallas.

1929
Under the leadership of Fred Florence, who rose from janitor to president, Republic Bank acquires North Texas National Bank.

1932
Florence’s Republic Bank (pictured today) agrees to make loans against oil still in the ground. It is a decision that changes Texas and the world.

Circa 1930s
First National Bank president Adams makes the first major loan to Haroldson Lafayette Hunt based on oil leases in East Texas.

1943
The 31-story Mercantile Bank building is constructed, becoming the city’s tallest building.

1953
An automated funds transfer system connects the Dallas Fed with Federal Reserve Banks nationwide. The system, which replaces older Teletype equipment, enables the quick, electronic transfer of funds across the country.

1950s
First National Bank and Republic Bank compete for supremacy in Dallas. The rivalry extends to the architectural contest to see which company could dominate the city skyline. This continues throughout the 1960s and 1970s.

1968
Don Wetzel, then a VP at Dallas-based Docutel, gets the idea for an invention while standing in line at a North Dallas bank. The invention? The ATM machine.

1981
The holding company of the First National Bank of Dallas changes its name to InterFirst Corporation.

1985
The 72-story InterFirst Plaza opens at Main and Griffin, as the tallest building in Dallas to this day. (It is now known as Bank of America Plaza.)

Late 1980s
Oil and real estate downturns, coupled with fallout from the S&L crisis, wreak havoc. In 1987, InterFirst merges with competitor RepublicBank Corporation, but the merged holding company First RepublicBank Corporation fails within a year and the FDIC closes all of its banks.

1987
Construction is completed on Momentum Plaza, headquarters for MCorp Bank, but Bank One soon dissolves the failed bank. (The building is now known as Chase Center.)

1988
North Carolina National Bank, under the leadership of CEO Hugh McColl, buys 50 percent of First RepublicBank with an option on the other 50 percent from the FDIC. NCNB exercises those options in 1990.

1991
NCNB Corporation changes its name to NationsBank Corporation, which later becomes Bank of America.

2007
Comerica moves its headquarters from Detroit to Dallas, becoming the only major bank currently based here.