Sunday, July 14, 2002

Dominant banks hold their positions

Fifth Third appears to be leader

By Jeff McKinney
The Cincinnati Enquirer

        Despite multibillion-dollar bank mergers and acquisitions and big name changes during the 1990s, the landscape in the Tristate banking community has not shifted much in the last decade.

        Eight of the 10 largest banks and thrifts in Greater Cincinnati still pretty much dominate the banking scene when it comes to handling money for local residents and businesses. They hold the largest deposit market share, offering the most branches and charging the most fees for products and services.

Leaders of the pack
        Yet the same industry trend that has dramatically changed how and where Americans stash their money the past five to 10 years also has prompted shifts in the Tristate banking market.

        For example, many former bankers in Greater Cincinnati have started their own community banks since the mid-1990s, trying to win the business of local residents intimidated or frustrated by big bank deals. The smaller bankers are betting that many of those consumers will change banks because they fear that bigger banks will mean more fees, less services and fewer options, experts say.

        “With all the consolidation, many consumers feel local decisions have moved further away from Cincinnati,” said Louis Beck, chairman of the holding company that predominantly owns Union Savings Bank in Cincinnati and Guardian Savings Bank in Northern Kentucky. “That certainly has helped us increase deposits at our financial institutions and resulted in the startup of more smaller banks than we've seen in recent years.”

        Moreover, depending on what industry barometers are used, local bankers have even more reason to squabble over a basic question: Who is Greater Cincinnati's largest bank?

        For years, Cincinnati's Fifth Third held that distinction based on deposits. That changed a year ago when the Minneapolis-based parent of U.S. Bank, which last month changed its name from Firstar, parked deposits — largely picked up from mergers — at the corporation's lead bank in Cincinnati.

        And even if the roughly $6 billion in deposits that U.S. Bancorp picked up at its main branch locally were backed out, Cincinnati's Provident Bank arguably would be the area's largest bank with about $7.6 billion in deposits, according to the latest data from the Federal Deposit Insurance Corp.

        But local bank executives downplay the deposit numbers, saying they're not a true measure of the area's largest bank, though they themselves have used that as a measure for years. They say Fifth Third, with 96 branches, $22 billion in assets and almost 6,200 employees in the eight-county area, is still the area's dominant bank.

        Interestingly, the number of branches for U.S. Bancorp/Firstar increased just one, to 96 in 2001 from 95 in 2000.

        Even Richard Davis, head of consumer banking at U.S. Bancorp, downplayed the deposit numbers: “We're not going to argue whether or not we're largest because Fifth Third is, based on branches and convenience in that market. We've very comfortable with our position there and that we're one of the area's largest banks.”

        Mr. Davis lived in Cincinnati for about eight years before leaving this year for Minneapolis. He played a key role in the rapid asset growth of the new U.S. Bancorp, formerly Cincinnati's Firstar and Star Bank, before renaming itself twice the last three years.

        Fifth Third chief executive George A. Schaefer Jr. said the deposit numbers are misleading. He said Fifth Third is still the area's largest hometown bank, based on assets, branches, employees and ATMs. “We continue to do pretty well here, and we're growing deposits here at every branch. This continues to be our flagship market and always will be.”

        But such debate was not even that big an issue a few years ago, before mergers hit the market.

        Though it's still based in Cincinnati, Fifth Third got in the consolidation game in a big way with its $5.5 billion acquisition last year of Grand Rapids, Mich.-based Old Kent Financial Corp., making it one of the Midwest's largest banks.

        That merger came along with three major bank deals started by Cincinnati's Star Bank since 1998 that resulted in today's new U.S. Bancorp. The deals prompted industry consolidation among several local banks and thrifts, the startup of many local community banks and branch expansions by existing smaller banks in Greater Cincinnati.

        For instance, Florence-based The Bank of Kentucky, the lone Northern Kentucky bank to rank among the 10 largest local financial institutions, has been able to grow by acquisitions and added branches the past two years. The growth occurred in Campbell County with its million purchase of Fort Thomas Savings Bank and the opening of a branch each in Dayton and Newport. The Bank of Kentucky also opened two branches in Grant County in the Dry Ridge area.

        Local bankers contend that the bottom line is this: Greater Cincinnati's banking market remains one of the most competitive in the nation, giving local consumers more options and services than ever before.


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