Joseph DiStefano asked, in an article in the Philadelphia Inquirer on August 12, 2018, “In digital America, does Philly need a hometown bank?” The article discusses the pluses and minuses of local banks in light of the announced merger of WSFS from Delaware and Beneficial Bank headquartered in Philadelphia.
Without a doubt, the answer is YES, we do need hometown banks. The reason is small businesses. I spent most of my career in local banking. The combined WSFS/Beneficial entity may sound large at $12 billion in assets, but this is a drop in the bucket compared, for example, to Bank of America’s assets of $2.2 trillion. These days, with the regulatory burden and technology costs, banks need at least a couple of billion in assets to cover those expenses.
I once heard Hugh McColl, former Chairman and CEO of Bank of America speak about a customer that somehow got through to his office with a complaint about something at her local branch. When she explained the situation to McColl, he told her to call the branch, and tell them about her McColl conversation, and explain what he said. She later called back and said that when she told the branch representatives about McColl, they didn’t know who he was. That is one reason we need local banks. When I was a bank president, I made sure I got myself around to each office and department so that employees knew me. If you are in senior management, you want to hear about problems and what is going on at a basic level. In person is a good way to do it.
Small business owners are hungry for personal relationships. It is easier to have them with smaller, local banks. Banks or most retail, non- internet businesses can do a better job if they have smaller, more manageable footprints- not thousands of locations and many activities spread across the country or the world.
I do agree with DiStefano that these days consumers don’t generally need local banks. Small businesses are different in that they need relationships, and that can’t be done remotely. Most small business owners are good at what they do, but need to rely on outside help for banking, legal, accounting, and other services. I have been on hundreds and hundreds of calls to small businesses in my banking career, and with my own firm which provides funding to entrepreneurs for expansion or acquisition. Looking at numbers and information is one part of evaluating businesses, but doing it the hands on, walking-around way, by visiting, meeting and looking, is at least a third of the due diligence procedure. Despite what the big guys may say, the level of local knowledge, service, and willingness to go out on a limb is not there with most of the major banking institutions.
Early in my career, national banks were headquartered in Philadelphia. Fidelity Bank comes to mind, as one of the most impressive. Where today most bankers are trained on the job, Fidelity had a training program. Fidelity had its own dining rooms and a talented chef. Now those perks are in Silicon Valley, at Facebook, Google, and Twitter who can afford them.
These days the closest we get to that type of bank is PNC in Pittsburgh. Similar to Comcast, it would be great to see a major national bank headquartered in Philly. This helps our economy by the business it brings to town. The Beneficial/WSFS merger will do some of that, but more importantly, it gives local businesses someone to talk with about their needs and whose fortunes also rise and fall on what is happening in the local economy.
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