STRATEGIES BANKING ON COMPETITION

I CAN’T THINK OF ANOTHER STATE THAT HAS THE DEGREE OF competition [in banking that] we have,” says John L. Adams, chairman and CEO of Texas Commerce Bank’s DFW region. Most major national banks are represented in Texas, from Chase-owned Texas Commerce to NationsBank, Banc One, BankAmerica. Comerica and Wells Fargo. NationsBank competes with an aggressive growth strategy, led by a Texas CEO, Bob Lane, who has mergers and acquisitions experience. Banc One has just completed a corporate streamlining that it believes will allow it to operate more efficiently and, coincidentally, has consolidated a lot of power in the Dallas-Fort Worth area. Texas Commerce focuses primarily on business accounts and might even change its name to capitalize on parent Chase’s national and international reputation. (The national parent company is spelled with a “c,” Banc One; the Texas operation with a “k.”)

Meanwhile, other local bankers, like Micheaux Nash, the banking entrepreneur who recently opened Dallas National Bank, are trying to recapture customers who may be put off by the “chaining” of American banking by promoting their independence and establishing new banks thai emphasize one-to-one contact. As Adams says, “It’s a people business.”

But there’s room for all comers. “There will always be individuals and small-business people who prefer the environment of a small, independent bank where they can go in and see the president,” says Ron Steinhart, Banc One’s Dallas-based CEO for commercial banking. “When you have one location or two, they can give a level of service that may be superior. But they might not have a telephone-banking service or a picture on the ATM card.

“I have never seen a case where a major organization doesn’t come in with products and services that weren’t superior than one bank in one state could afford by themselves,” he says.

Adams and Steinhart agree on one thing that won’t happen, unless a major nationwide bank makes a Blockbuster-type move to Dallas: We will never see another giant Dallas-based bank.

Says Adams: “It could happen, but it would take a several-hundred-million-dollar investment, and that’s on the low side. Tens of millions will be needed for technology and advertising, and they ’d have to have the ability to attract quality people. Are there some companies interested in that type of organization? Possibly. Are there ones that could provide a sufficient revenue stream? 1 don’t know. Probably not,”

Steinhart says such a bank isn’t needed. “Personally. I believe we have a very’ strong banking system that provides a lot of funds to worthy individuals and companies,” he says. “We serve the consumer so much better. We also have the abilities because of our national connections to do S3()0-million. S400-million deals. We contribute both time and resources to the community. We give more money away today than when we were Texas banks. There’s a better banking system out there than there was 10 years ago.”

And the bankers are using different methods to try to make it even better 10 years from now. Here are a few of the stories:



Texas Commerce Bank: THE POWER OF A NAME



TO THOSE WHO WITNESSED AND WEATHERED THE BANKING BUST of the late 1980s, the name Texas Commerce Bank inspires a wistful feeling. Texas Commerce was the business-oriented Houston bank that, along with Dallas* Republic, Mercantile and First National, made Texas an important U.S. banking center, with five of the top 25 banks in the country.

When the Dallas banks started failing, the selective, conservative Texas Commerce swooped into the Dallas-Fort Worth market with a vengeance and, behind the leadership of regional chairman/CEO Adams, vacuumed up much of the large corporate business left behind by [he insolvent institutions.

Today, only Texas Commerce and San Antonio’s Cullen-Frost Bank have kept their names. Frost is still Texas-owned, but New York’s Chemical Bank bought Texas Commerce for more than $1 billion in the late ’80s. Last year. Chemical merged with Chase, rocking the New York banking world. Texas Commerce now has access to the products, services and international expertise of one of (he world’s largest banks-and may soon have its name.

To play on the New York bank’s old advertising slogan, there may be a Chase Advantage to bringing that name here. Goodbye, Texas Commerce; Hello, Chase? Didn’t New York get enough from us when the Yankees beat the Rangers in the ’96 playoffs?

“We have maintained our name. That’s not to say we always will,” Adams says. “It’s a question we’re asking ourselves. There’s a board committee working with that issue.”

Internal research shows that the Chase name is the second-most respected worldwide among U.S.-based financial-services institutions, according to Adams; American Express is No. 1. Domestically. Chase. Citibank and Morgan Stanley make up the top echelon. Because it is Texas Commerce Bank-only about one-third of its business is retail banking and it operates only in the eight biggest Texas markets-its primary cliente’e would, bank officials believe, benefit from affiliation with Chase. And because a nice slice of Texas Commerce’s business is Texas-based corporations that are national and international in scope, such as EDS and JCPenney, the Chase name would provide greater credibility in international markets.

Face it-when dealing in international trade, what looks better as a banking reference, Texas Commerce or Chase?

“There is the power of the Chase franchise,” Adams says. “We find more and more of our clients and customers want to do things internationally. We can do that through the product and service capability of the new Chase.” He mentioned a recent meeting with a customer who had half of his business outside the United States. “Because of the capabilities of Chase, we can compete with the Citibanks and Bank of Americas that have the [same] international capabilities we have. We can help [customers] in Pakistan, Argentina. Chile and the Eastern bloc countries.”

Adams says Texas Commerce is looking at how the bank’s four main client groups would react to a name change. The large,Texas-based national and international corporations are already receiving Chase products primarily, and a name change could help improve that end of the business.

But the mass retail market doesn’t know, by and large, that Texas Commerce and Chase are linked. “There’s a disconnect,” Adams says. However, he adds. Chase, through its credit-card and mortgage operations, has as many retail customers in Texas as does Texas Commerce. Remember, Texas Commerce is only in the big markets and doesn’t open branches in supermarkets or place drive-through ATMs in strip-center kiosks.

The highly affluent folk who use Texas Commerce’s private-banking services have “a great identity with Chase,” Adams says.

The middle-market, regional business clientele is the one Adams says the bunk is most concerned about. These businesses “have a strong identity to Texas and a strong identity to Texas Commerce,” Adams says. This is also the market Adams identifies as providing the bank its biggest growth opportunities.

In many ways, Texas Commerce and Chase have the same philosophies. Both are upscale, business-oriented banks that cater to success. Chase is the bank of the Rockefellers; Adams says it’s part of Texas Commerce’s culture to be “very selective in who we do business with, and we don’t do business with everybody just because they want to do business with us.”

Chase has not adopted a cover-the-country growth pattern as have NationsBank, Banc One, Bank of America. Comerica and Wells Fargo, the other giant institutions with huge presences in Dallas-Fort Worth. Chase only has a presence in the tri-state New York City area and, through Texas Commerce, in Texas.

If Texas Commerce does become Chase Texas-how many ad agencies are now plotting pitches using the tag line “Chase: the Texas commerce bank”?-it may, on the street, have to go through many of the same identity pains its Texas competitors have been through in the 1990s. The current big three in the Dallas-Fort Worth market are Texas Commerce. NationsBank and Bank One. The NationsBank name is 6 years old; the Bank One name is 7 years old in Texas, and people are just now snapping to the fact that the Texas operations of the latter two aren’t being dictated out of Charlotte and Columbus, respectively.

“We’re a global bank with local deliver)’ and local decisionmaking.” Adams says. “We compete with Citi and Morgan and Goldman [Sachs], but we’re local and they’re not. Our people are at the table in Austin, in El Paso, in the Valley, in San Antonio, in Beaumont. Others may [be] in Dallas and Houston, but they’re not in those other places.”

The trick will be to convince the public that this is so-or even that, in reality, Texas Commerce is now actually Chase Texas but with the old, well-regarded name. Ron Steinhart. the Dallas-based CEO of nationwide commercial banking for Banc One and former chairman of Bank One Texas, said one of the battles that his institution, NationsBank. First Interstate (now Wells Fargo) and BankAmerica had to face when they came in was that they were required by the FDIC to collect bad assets. “There was no way to convince the customer it wasn’t the bank coming down on them,” Steinhart said. At least the Chase name wouldn’t come in with Texans believing it was the bogeyman.

On one hand, it would be the loss of another great Texas banking name. On the other, if it helps Texas business grow and succeed, it won’t matter in the long run.



NationsBank: THE URGE TO MERGE

If there’s a banker in Texas who understands the merger mania and joint-venturing that pervades the banking industry today, it’s NationsBank Texas chairman Bob Lane.

From almost the very beginning of his career, he has led banks into consolidations with larger institutions. Today, he works in the opposite direction, helping NationsBank do deals with smaller banks across the Southwest to increase its market presence and facilitating partnerships with supermarkets and the like to expand its branch network on a cost-efficient basis.

Lane, a graduate of Southern Methodist University and the University of Texas Law School, began his banking career with a summer job at First National Bank of Dallas-ironically, a bank that’s now part of NationsBank’s family tree. In 1968, Lane bought a small bank in Columbus. Texas, and nine years later led a group of investors to buy a bank in Corsicana. That’s when his merger experience began.

Within four years. Lane had helped accomplish a merger of the Corsicana Bank with InterFirst. one of the large hank holding companies thai was prevalent in (he days before branch banking became legal in Texas. Lo and behold, one of his first assignments for InterFirst–the successor to First National-was to go to Austin, where the company had bought Austin National Bank. Then First Republic merged with InterFirst. That bank ultimately failed but North Carolina National Bank picked up ils pieces and. a few years later, became NationsBank.

Now, Lane is playing in the big leagues of bank mergers. He’s coordinating the integration of Boatmen’s National Bank, the dominant bank in St. Louis and one of the major players in Oklahoma and Kansas City. Mo., into NationsBank, as the Texas office of the Charlotte-based giant begins to overlap into the entire Southwest.

That. Lane says, has been taking most of his time recently. The transaction makes Lane one of the few Texas bankers-along with Banc One’s Ron Steinhart, one of Lane’s old InterFirst and First Republic colleagues-whose influence is now spreading outside Texas. Some of the Boatmen’s operations will be handled out of Dallas, so the city now becomes an even more vital center for NationsBank as it pursues its aggressive mergers and acquisition strategy.

But Lane is also active on a smaller level. NationsBank is extending its reach by putting full-service branches in Albertson’s stores. That saves money on brick and mortar and reduces overhead, allowing a more effective way of reaching more customers. Not only that, but it can attract customers with one-stop convenience-why go to the bank when you can pick up your groceries, prescriptions and a money-market account at the same place?

A prime test of this strategy will take place in the suburb of The Colony, which for most of the past 21 years was served only by a local bank. With a new Albertson’s location, NationsBank is the first of the major “chain” banks to locate in The Colony. (Earlier this year. Guaranty National opened a branch in the city, and First State Bank is building a branch there, too.) And NationsBank probably never would have gone into The Colony if it had had to build its own facility.

Like NationsBank itself. Bob Lane has been in growth mode all his career. However, he has announced his retirement effective at the end of this year. Last September, Tim Arnoult, who is based in Dallas, became president of NationsBank’s Southwest region, including New Mexico, Oklahoma and Texas. No separate president has yet been named for Texas.



Banc One: BECOMING TEXAN

SOMF. 15 YEARS AGO, FIVE OF THE 25 LARGEST BANKS IN THE United States were in Texas. Slowly but surely, 10 years after the banking bust erased all but Cullen-Frost from the scene, one of the major nationwide financial institutions seems to be becoming a Texas bank.

Banc One chairman John McCoy and president Richard Lehman will probably never move headquarters and their offices from Columbus, Ohio, to Dallas, but they have entrusted a good deal of their company to Dallas-based individuals.

Perhaps the biggest delegation of power to Dallas was the promotion of Ron Steinhart, the former InterFirst executive and cofounder of Team Bank in the late 1980s, from chairman and CEO of Bank One Texas to CEO of Banc One’s commercial banking division. The international banking division, cash management operations and back-office, customer-service responsibilities are run out of Dallas. Oil-and-gas and real-estate trusts nationwide operate out of Fort Worth. One of the bank’s primary computer and programming facilities is in Bedford.

“Companies have come to the conclusion that if they’re a national company, they have access to all sorts of communications, so physical position is less important,” Steinhart says. “Second, if you do a lot of traveling, it doesn’t matter where you travel from. It’s even better if you’re located in an area where you have good transportation access.’* So when Banc One selects key members of the organization, they allow them to locate where they want.

Steinhart had been in Dallas 33 years when his big promotion came. “At this point in my life. I’m not interested in moving.” he says. His new job signifies the last major adjustment in Banc One’s reengineering, Instead of organizing by geographical unit, the bank decided to shift things around and organize along lines of business. The commercial banking area was the last area to be made a line of business in Banc One.

“The goal is that the sum of the parts will be greater than if the whole thing was operated as one unit.” Steinhart says. He supervises regional chairmen located in Columbus. Indianapolis, Dallas, Arizona and Louisiana, as well as another executive responsible tor real-estate lending in the Southern and Western regions.

Steinhart is now, perhaps, the highest-positioned Texas banker on the national level. Some people probably wondered whether Texans would ever regain the type of influence they once had on the national banking scene. To Steinhart, it was only a matter of time. Yes, out-of-state banks cleaned up much of the rubble thai remained after the avalanche of the late ’80s. But what many don’t realize is that the outsiders used Texas clean-up crews.

“If you look at the major Texas bank holding companies, you’ll see that they’re still run by the survivors of the Texas debacle,” Steinhart says.

Not to mention that Banc One, NationsBank. Chemical and the rest wanted people working at their new Texas banks who were familiar with Texas banking. “They look for talent to take them to the next level,” Steinhart says. So the Ron Steinharts and Bob Lanes of Texas who survived the crash are still running Texas’ banks.

“Those last two or three years, we were all under constant regulatory surveillance,” Steinhart says. “They had full-time investigators in there. They were able to assess which people shouldn’t be in the industry any longer….The people who didn’t survive were the ones regulators felt either didn’t give everything they had or weren’t honest with them.”

Not only did Ron Steinhart survive, but in 1988 regulators approved his takeover of failed banks to form Team Bank. He showed again that he was at the forefront of Texas bankers in 1996 when Banc One promoted him to one of the top five positions in its nationwide bank.