Friday, September 21, 2001

Banker, adviser share clients

Key Bank acquisition allows flexibility

By Jeff McKinney
The Cincinnati Enquirer

        When Bill Lange decided to enhance the benefits offered to his employees, he leaned on his banker to make that happen.

        The Cincinnati orthodontist established a 401(k) retirement plan for the 13 workers at his family dental practice after his lender at Key Bank referred him to advisers at Gradison McDonald Investments.

[photo] A busy Montgomery orthodontist, Bill Lange was able to use his bank as a pathway to other financial services, among them enhanced benefits for his employees. At left is assistant Tracy Hammer; at right, dental hygienist Cindy Brown.
(Steven M. Herppich photo)
| ZOOM |
        Dr. Lange, who first approached Key in 1994 to get financing to open his Montgomery-based office, has since used the bank to set up college education funds and estate planning for his family.

        “The addition of the brokerage has been great because it gives me another option to consider for my finances, whether it's for personal or professional use,” Dr. Lange said.

        The marriage of Key Bank, a division of Cleveland-based KeyCorp, and Cincinnati-based Gradison McDonald in 1998 also shows how KeyCorp is relying more on fee-based businesses and stringent expense control to boost profits and its stock price after being pressured by investors to do so in recent years.

        To regain Wall Street's favor, KeyCorp's plan includes focusing on growing businesses that target affluent individuals and building customer relationships by cross-selling a range of products.

        That's also what prompted KeyCorp in 1998 to pay about $580 million in cash and stock to buy McDonald Investments Inc., a deal that included Gradison with three offices locally.

        Since that deal, KeyCorp has run its Key Bank and Gradison operations in Cincinnati as one line of business, and the unit has become a model of growth for the parent company.

        Since Key Bank and Gradison McDonald began tracking referrals at both businesses, the number of associates on both sides referring individual and business clients to each other has tripled.

        “Cincinnati is clearly an example of what we're trying to do throughout the company,” Henry Meyer, named KeyCorp's new president and chief executive in May, told The Enquirer in a recent interview.

        Mr. Meyer said the Cincinnati unit ranks fifth in profitability out of 26 district offices that KeyCorp operates from Maine to Alaska. The Queen City operation made a 10 percent increase in its contribution to the parent company's bottom line in the first six months of this year, compared with the same period a year ago.

        Richard Curry, an investment banker named to run Key Bank and Gradison locally, said the units have been able to aggressively cross-sell products.

        Key Bank has 25 branches locally and about 400 employees. Gradison McDonald is a brokerage with about 250 employees that manages about $6 billion in securities for about 50,000 clients in downtown, Kenwood and Crestview Hills.

        “It's turned out to be a great combination because of the cross-sell and referral opportunities,” Mr. Curry said.

        Mr. Meyer, 51, is relying on growth from the likes of Key's Cincinnati unit to help boost the parent company's market value.

        The banking giant took a $550 million second-quarter charge to restructure, including shedding 4,000 jobs and existing non-customer relationship building businesses like indirect auto leasing.

        Mr. Meyer said Key realized that it can't be all things to all people and now is focusing on redeploying its resources in businesses that build customer relationships, generate fee income and expand in targeted geographic areas.

        He also said the company will not rule out making acquisitions locally, although that likely won't happen soon because of the weak economy.

        But Mr. Meyer said Key sees growth opportunities north of Cincinnati in such areas as Butler and Warren counties and south of the city in Northern Kentucky. He said that if Key did a deal, it would be a bank or thrift with assets between $100 million and $500 million.

        “We would consider a deal, but I can't tell you that it will happen in the next day or next month,” he said.


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