Investors are reaping huge windfalls from a pack of small banks gnawing at the heels of New York’s giant banks.
With meteoric stock gains of up to 182 percent, this handful of aggressive medium-sized banks has scooped up billions of Big Apple business by opening small-town-styled branches in Manhattan.
“Of every single person I’ve talked to in Manhattan, I’ve yet to meet one person who likes their bank,” said Vernon Hill, chairman of Commerce Bank, a 170-branch New Jersey bank that’s making its New York debut with four new branches here this fall – all of them open seven days a week, on holidays and nights.
Checking accounts will be free, with no minimum balance required, and all ATM transactions will be free, even if you use your ATM card elsewhere.
Hill will reimburse the typical $1.50 ATM transaction fee to your Commerce Bank account.
“Frankly, Manhattan is an under-served market for retail banking, and New Yorkers say they’re sick and tired of being abused by banks,” said Hill.
North Fork is kicking giant banks in the pants by using the personal touch at its six new Manhattan branches, which in a year have snared a surprising $1 billion in customer deposits.
“For years, the largest banks in New York haven’t done a good job focusing on the small business segment or the consumer segment,” said banking analyst Mark Fitzgibbon of Sandler O’Neill & Partners.
And forget about the suburbs, which big banks have all but ignored in favor of high-net-worth customers, corporate banking and other financial services.
“J.P. Morgan-Chase, CitiGroup and HSBC have focused on the top end of the market, and they’ve under-served the rest of it,” he said.
“It’s created a huge opportunity for some of the more nimble medium-sized community banks and savings-and-loans,” Fitzgibbon said.
Analysts have given high marks to most of the smaller and medium banks carving out their territories in New York, the world’s biggest banking market.
And their stock prices tend to support the praise. NY Community Bancorp, a holding group that’s grown to 120 branches in the metro area, has skyrocketed by 182.4 percent in the past year. It has just acquired Richmond County Savings, which doubled the group’s assets to $8.2 billion.
Fitzgibbon said that Richmond County – which will continue under its name operating 34 branches in Brooklyn, Staten Island and New Jersey – also has its eye on opening it small-town bank format in Manhattan.
“Management has said they wouldn’t rule out that opportunity at all,” said Fitzgibbon.
Generally, the smaller banks offer free checking, cheap mortgages, lower cost insurance products, brokerage services and even a personal phone call if one of your checks is ready to bounce.
“They’ve been able to take business away very rapidly and easily from the giants because they’re doing a good job with small-business customers and consumers,” said Fitzgibbon.
“The real differentiating factor between the smaller institutions and the giants is the people in the banks – you get attention from a person, not a 1-800 number to call,” said Fitzgibbon.
Analysts say the half-dozen banks currently grabbing market share are raiding different segments.
“North Fork is going after entrepreneurs and small-business people, while Commerce Bank will be taking consumer banking,” said banking analyst Heather Dilbeck of Ryan, Beck & Co.
“Everyone is converging on a different piece of business.”
Dilbeck sees some more consolidating in the scramble.
“New York will be undergoing a wave of consolidations, and ther’s a fair amount of smaller, medium-sized banks out there – SI Bank & Trust, Independence Community, Greenpoint, Astoria Savings.”
A RUN FOR YOUR MONEY
Local banks moving into the New York market have been seeing their shares gain strongly. Their performance:
NAME PRICE TODAY 1 YR AGO % GAIN
Richmond County Savings$43.41$19128 %
Independence Communty Bank$22.91$13.3176%
SI Bank & Trust$32.18$18.3773%
Dime Savings$41.26$16158%
North Fork$31.77$16.8788.3%
NY Community Bancorp$43.41$15.37182.4%
Commerce Bank$73.25$52.7539 %