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February 9, 2010 |
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| November 25, 2009 |
By: Wayne Tompkins |
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ow that PNC Bank has unveiled its signage and formally tossed its hat into the South Florida banking arena, the Pittsburgh-based regional power is preparing to go head-to-head with other recent big-name arrivals.
“PNC brings some stability. We’re obviously a survivor in this game,” said Craig Grant, the bank’s Florida regional president who oversees 107 statewide branches. “Today we don’t have a significant market share, but our plan is to grow it significantly over the next couple of years” through both organic growth or acquisitions.
So who is this latest entrant in South Florida banking?
“PNC is one of the biggest banks in the country,” said Ken Thomas, an independent Miami banking analyst. “It’s the old Pittsburgh National Corp. They bought up …some of the biggest banks around the Midwest. NatCity gave them Indiana and Florida, where they had nothing major prior to that.”
PNC has had two offices in Naples and Vero Beach through PNC Wealth Management, a subsidiary that deals with customers who have $1 million-plus in investable assets, for about 15 years.
The company weathered the recession in solid shape, having resisted Wall Street pressure to enter the subprime mortgage market and other dodgy schemes in the run up to the financial crisis. Like other new and well-capitalized arrivals such as TD Bank, Wells Fargo, Chase and the rejuvenated BankUnited, it’s looking to take advantage of weakened competitors in a post-recession climate destined to consolidate around fewer and larger brand names.
PNC’s net income for the quarter ended Sept. 30 hit $559 million, more than double the previous quarter’s $207 million, even as it set side $914 million in loan-loss provisions. Total assets were $271 billion at Sept. 30, down from $280 billion on June 30. Loans declined by 3 percent during the quarter due to what the bank attributed to lower originations and usage of lines of credit as well as charge-offs. The bank has operations in 13 other states — none contiguous to Florida — with 2,600 branches in a national footprint that has long included cities like Louisville, Pittsburgh and Cincinnati.
Noting that PNC’s Florida locations are a significant departure from its traditional Midwestern focus — the Florida branches came as part of last year’s $5.6 billion acquisition of major Midwestern rival National City — banking analyst Al Savastano of Fox-Pitt Kelton said the company needs to decide what it wants to accomplish in the Florida market.
“Over time, they need to decide whether they want to get bigger in Florida or if they want to leave Florida,” Savastano said. He favors PNC’s odds in the state, noting for example that the popularity of PNC’s “Virtual Wallet” — an online interface geared to “Generation Y” young adults — has the potential to do well in the Florida market.
Grant, a 25-year PNC veteran who for his part does not sound like a man who plans to leave Florida anytime soon, said the bank’s South Florida plans call for about 15 to 20 new branches over the next 18 to 24 months.
“We’re particularly going to try to expand our Broward County presence,” he said, noting that PNC acquired several locations in Palm Beach County when it acquired National City’s Florida branches. “There is obviously a lot of wealth management and retail opportunity in Broward, and we also think there is a lot of corporate opportunity down there.”
While growing deposits and revenue is important, “the focus is on growing households, relationships and checking accounts. We have very aggressive budgetary targets that we’re trying to hit.”
The bank is seeking to make loans that fit its moderate risk profile, “but we are definitely in the lending game,” he said. “We would like to add assets to our balance sheet including SBA loans.”
Grant said that while he doesn’t think there will be a lot of banks in Florida doing significant real estate lending in the near future, the bank is “definitely interested” in lending to businesses and individuals.
“Our bread and butter is manufacturing and service businesses, which there are a lot of in South Florida,” Grant said. “Health care is another important sector the bank has a good relationship with. We’re looking to do more business with a lot of the universities here in Florida.”
Thomas said cutting through the clutter of South Florida banking and its changing landscape will not be easy.
“They’ve got a number of challenges, such as trying to explain to people who or what PNC is,” Thomas said. “Customers get deluged with so many banking acronyms and names, and they get confused.”
Still, entering the Florida market is an important step for any regional bank with national aspirations.
“Florida’s going to be a very important market but I hope they’re smart enough to go after all of South Florida,” Thomas said, noting that some large banks historically eschew the Miami-Dade market while placing large bets on Broward and Palm Beach. “Florida is the fourth biggest market in the nation — $400 billion. The three South Florida counties have $150 billion of that, that’s about 38 percent.”
With its unique demographics and an 82 percent minority population, many banks have shied away from a Miami-Dade market they feel they don’t understand. Thomas said that’s passing up a lucrative opportunity.
“You have to adjust your marketing, but this is where the money is,” he said. “The wealth management, the retail market, this is one of the best banking markets in the country. That’s what smart money like [Coral Gables-based] BankUnited understands. You have to go to the money counties.”
GROWTH STRATEGY
Grant said PNC is doing wealth management, corporate banking and “plenty of calling” in Miami-Dade today, though it has yet to open its first retail branch in the county.
“We’ve picked up a couple of significant clients in Miami-Dade recently,” Grant said, “so hopefully we’ll start taking some market share.”
Grant said that part of the bank’s strategy is to expand its branch network in a contiguous manner.
“Right now we have a presence from Orlando down into Fort Lauderdale, but a lot of our Southeast Florida presence is in Palm Beach County,” said Grant, who is himself based in West Palm Beach. “Our philosophy is to continuously move south. We need to fill out Broward County from a retail perspective before we head further south.”
Grant said the transition of the National City branches to PNC is proceeding smoothly.
“The differences were not dramatic,” he said. “We did business in a similar way, particularly in the branches. The systems were similar so it has not been a dramatic change for those people.”
Wayne Tompkins can be reached at wtompkins@alm.com or at (305) 347-6645.
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