Friday, February 20, 2004

Scramble begins to lure Provident's customers

By Jeff McKinney
The Cincinnati Enquirer

U.S. Bank, which runs the branch in the foreground on Miami Avenue in Madeira, ran a full-page ad to invite Provident customers, such as the ones who bank across the street, to switch loyalties now that National City is taking over Provident.
The Cincinnati Enquirer/STEVEN M. HERPPICH

Just three days after National City Corp. agreed to pay $2.1 billion for the parent of Provident Bank, local bankers appear to be gearing up for a blitz to woo customers before the Cleveland-based giant enters the Greater Cincinnati market.

Consumers can expect to see new financial products, beefed-up marketing campaigns and - maybe - fee cuts as banks move to single themselves out from the competition.

The first volley was sounded Wednesday when one of Provident's largest competitors, U.S. Bank, ran a full-page ad in the Enquirer in a pitch inviting Provident customers to switch their accounts to that bank.

And though other area banks won't reveal specifics of how they plan to entice Provident's 500,000 customers to bank with them, they confirm they are planning aggressive steps to deal with the arrival of National City, which, after the merger, will be the nation's eighth-largest bank.

The sale of Provident Financial Group was announced Tuesday, and, when completed later this year, will bring to the region a bank with more than $130 billion in assets and more than 1,200 branches in six Midwestern states.

Analysts said U.S. Bank's newspaper ad is early evidence that National City's presence will change the way U.S. Bank and others serve local customers in an expanding market.

"This is the type of merger that facilitates competition in the market place," said Greg McBride, a senior financial analyst at "When any merger is announced, there are plenty of institutions that are very happy to be the bridesmaids and stand ready to scoop up any disgruntled customers left in the wake of the merger."

Analysts also say it's highly likely that other banks will launch marketing campaigns to go after customers and employees of the merged bank. Provident is expected to change its name and convert to National City by January.

Depositors are banks' most precious treasures. So what would make them switch?

Ophelia Norman of Bond Hill said she likes her bank because it has good customer service and employees she likes. But she doesn't like its crowded teller lines and fee levels for money orders and bank cards.

But she said she likely would not change banks unless customer service there weakened. "I would switch if I did not like the service," she said.

In a survey last summer by the American Bankers Association, 71 percent of bank customers said poor customer service would make them switch their checking account to a new bank.

Other factors that the survey indicated would cause a switch included:

• Higher interest rates on deposit accounts.

• More branches, for convenience.

• Free checking.

• The availability of online banking services.

Jim Schwab, Cincinnati market president at U.S. Bank, said the bank is increasing its marketing budget up to 25 percent this year in Cincinnati. Schwab said those efforts include special pricing on some products, granting one-time initiatives such as waiving certain fees and buying back unused checks.

"We're using this as an opportunity to say to Provident customers, we're here to serve you, and we want your business," he said.

Fifth Third, Cincinnati's largest bank, ran a two-page ad in the Enquirer in 1999 after its biggest local rival, Star Bank, renamed itself Firstar. Formerly based in Cincinati, Star via mergers became Firstar, and about two years ago, U.S. Bank. It is now based in Minneapolis.

Fifth Third is now getting into the new wave of competition. The bank said it plans to run a full-page ad in Sunday's paper, telling the public it has 200 branches available from Northern Kentucky to Dayton to conveniently serve them.

"Competition always bodes well for the consumer," said Robbie Jennings, Fifth Third's spokesperson.

And other banks have increasingly emphasized customer service as the way they plan to set themselves apart from the competition.

Peter Raskind, executive vice president for consumer and small business financial services at National City, said the bank is confident it can deliver services and products to customers at competitive prices.

He said National City will bring Provident customers new products including more mortgage options and 25 different types of credit-card products.

Raskind also said in addition to building branches, Provident customers will see National City be very competitive on pricing when it comes to loans and deposits.

Dennis Shafer, head of retail banking at PNC Bank in Cincinnati and Northern Kentucky, said he would not be surprised if the Provident/National City deal creates price competition among banks.

Provident customers, he said, will have to deal with new policies, procedures and names. "They will definitely have to make a decision on where they will bank," he said.

In Northern Kentucky, the Bank of Kentucky also plans to go after Provident customers. "Between now and when the deal closes, we will launch a marketing campaign to attract Provident customers," said Don Bahr, senior vice president at the Crestview Hills-based bank, which has 25 branches.


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