By Jeff McKinney
The Cincinnati Enquirer

Greater Cincinnati's 10 largest banks expect to open nearly 60 new branches during the next two years, creating an economic boost for construction companies, hundreds of office jobs and more choice for consumers.

A new Huntington Bank branch is under construction on Union Center Boulevard in West Chester. (Tony Jones photo)

According to the Federal Deposit Insurance Corp., the expansion is the region's largest bank growth plan in at least the last decade. It will focus on upscale, growing areas such as Butler, Warren and Clermont counties in Ohio and Boone, Campbell and Kenton counties in Northern Kentucky. In these areas, the number of households and personal income are expected to continue to grow at brisk rates during the next few years.

Bankers expect to maintain their offices in Hamilton County and Cincinnati but say that market is saturated and expansion will be limited.

"We're going where there is rooftop growth,'' said Bob Niehaus, executive vice president at Fifth Third Bank, Cincinnati's largest bank. "That's where all the people are, and with our aggressive sales culture, that will allow us to maximize our locations."

Fifth Third could invest up to $12 million in eight new area branches by 2005.

If they follow through on their plans in 2004-2005, the big banks would have 565 branches in the region, up 11.4 percent from the current 507 branches, according to FDIC data and Enquirer research. Smaller banks currently have 240 branches in the region.

Banks polled by the Enquirer declined to identify specific locations for their new offices, citing competitive concerns.

However, they outlined expansion plans that represent a major economic boost for the Tristate. Among the highlights:

• About 580 jobs will be generated by 2005 to staff 58 new offices. That could create more than $8 million in new annual payroll just for tellers. With salaries for branch managers and vice presidents factored in, the impact jumps easily over $10 million.

• Industry sources say the average office will cost about $1.25 million to build and equip, creating nearly $72.5 million of work for area construction companies and suppliers who provide everything from furniture to carpet to computers for the new offices.

• As the banks jockey for position, consumers could see a wider array of banking products and lower fees for services.

• Local media can expect a healthy boost in spending for advertising as banks hustle to lure customers from one another.

Greg McBride, financial analyst at Bankrate.com, which monitors bank fees nationwide, said consumers might see greater availability of free or low-cost checking accounts, higher returns on certificates of deposit or lower loan rates. "The consumer also would benefit from more convenience in closer proximity to branches from home or work," he said.

McBride said the trend also indicates customers have not fully embraced electronic banking. "Many customers have shown a preference for branch access or even making routine transactions within a branch," he said.

John Beard, a partner at Freedman, Gibson and White, one of the region's largest advertising firms, said a marketing blitz is sure to accompany the increased competition. "As they try to gain more critical mass ... you'll see them spend more on promotions and advertising," he said.

Indeed, banks will use the new branches not just to hold consumers' savings, but also to sell them everything from certificates of deposit to mortgages to checking accounts and stocks.

Driving the money machine is a prolonged period of low interest rates. The housing market in Greater Cincinnati is expected to set a sales record this year as buyers rush to lock in mortgage rates at 40-year lows, and builders are hatching speculative housing developments throughout the region.

Low interest rates also mean traditional savings accounts are less attractive, and banks are moving to serve consumers seeking higher returns in stocks, mutual funds and other investment products.

Real estate brokers say the banks will have to pay big bucks for prime sites in their target markets.

Chip Sudbrack, a Realtor at Tri-State Commercial Group, which helps companies find land to expand, said banks on average could pay up to $500,000 an acre for corner-lot properties.

But as bankers push deeper into the suburbs, their expansion likely won't include Hamilton, the area's most populous county. The reason: big banks already have many branches in Hamilton County, giving them adequate coverage to continue to grow deposits and reach customers. But because Hamilton is a core market and also is expected to grow over the next five years, they won't be quick to close branches either.

So while they hold onto the Hamilton County market, the suburbs offer the most room for banking growth.

Michael Prescott, regional president at Huntington Bank for Southern Ohio and Northern Kentucky, said his bank could open six new branches by late 2005, likely targeting Butler and Warren counties in Ohio and Boone and Kenton in Northern Kentucky.

"We see those as the fastest areas for household growth and more new businesses opening in those areas," he said.

Many banks also are opening branches because it's cheaper than buying other banks for growth.

Don Bahr, senior vice president at the Bank of Kentucky, said the advantage of building branches versus an acquisition is that branch expansion "allows us to target very specific areas for growth."

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E-mail jmckinney@enquirer.com