Will Chase Bank look like a savior to the customers of the 105 Washington Mutual branches in Oregon or just another east coast big city bank? What will Maryland residents do when the stage coach logo from west coast bank Wells Fargo starts popping up on the 81 Wachovia branches in their state? People in Ohio don’t like it when the NFL’s Pittsburgh Steelers come to Cleveland. How will residents react when 150 year-old Cleveland-based National City Bank has its name removed from its 419 branches in Ohio and replaced with a large Pittsburg, PA-based bank?
Credit unions and other local financial institutions look to benefit from these large bank mergers. USA Today reported that a recent Nielsen-Claritas survey said one in five banking customers were likely to move at least some of their funds to another institution in the near future, with nearly one in 10 likely to move all their money in the next 12 months. Customers of merging banks may move their accounts at a quicker pace.
Large bank mergers motivate people to move their account. A changing bank card, new account number or even new phone number motivate people to take notice of their bank and consider their alternatives. FDIC data shows some examples of bank customers opting to try a new financial institution rather than deal with a merger:
- In 2007, PNC Bank merged 7 branches of Mercantile Safe Deposit and Trust Company in Montgomery County, Maryland. The average decline in deposits at these seven branches between June 2007 and June 2008 was -26 percent.
- In 2007, Wachovia Bank merged 34 branches of World Bank in Colorado. The average decline in deposits at these 34 branches between June 2007 and June 2008 was -12.5 percent.
- In 2004, Bank of America merged 12 branches of Fleet Bank in Rockingham County, New Hampshire. The average decline in deposits at these 12 branches between June 2004 and June 2005 was -19.7 percent.
How will the large bank mergers impact credit unions? Credit unions are safe, sound and actively lending to members. Will this important message reach consumers unfamiliar with the value of credit unions? In some cases, it is already happening.
Witness this activity in markets where bank merger activity is up. In Richmond, VA, $125 million Fort Lee Federal Credit Union has double digit growth in both loans and shares as of September 2008. In fact, total checking account dollars increased 22 percent between September 2007 and September 2008. Fort Lee Federal Credit Union, with a field of membership that includes the military post and four surrounding counties, has 35 Wachovia branches in its market. Florida Central, a $247 million credit union based in Tampa, had an 11 percent growth in auto loans between September 2007 and September 2008. Plus, checking account dollars increased 90 percent during the same time period. In Florida Central’s market, Wachovia represents 25 percent of total insured deposits.
How many times in history have three of the country’s top 15 banks merged away in the same year? Credit unions were created in the early part of the 20th century to support people in a financial crisis. The current crisis provides credit unions with additional opportunity to show the value they provide to even more consumers in the U.S.