Thursday, February 10, 2005

Big bad bank + small bank = Bigger bad bank

A simple equation that explains the results of a bank takeover and one that is the reason behind the rise in private banks geared towards keeping high net-worth individuals happy.

While this has been the subject of numerous pieces on bank takeovers, what prompted me to write today was a personal experience with formerly Fleet Bank. I have been a long-time customer of Feet, and have been happy with their customer service.

Until today, that is. I should have seen it coming - last month's bill from Fleet said Bank of America showing that the merger is now in the execution stage. The call to customer service today was worse than an hour at the dentist getting a root canal done. But it was exactly the same quality as Bank of America's! So much so that, when I ended the conversation with a "you are about to lose a long-time Fleet customer", all I got was a "Thank You and bye" from the other side!

If you had any doubts about there being any room for newer/smaller banks, this should dispel it. Each time there is a takeover, you will see some smaller banks benefit from the customer flight away from the resulting monstrous entities.

How do you play this M & A sideshow ? By investing in banks that offer specialized/individual services, or smaller banks that cater to affluent localities.

Examples include PrivateBancorp (PVTB), Bryn Mawr Bank (BMTC), Greater Bay Bancorp (GBBK), Silicon Valley Bancshares (SIVB), Vineyard National Bancorp (VNBC) and Foothill Independent Bank (FOOT).

I own stock in PrivateBancorp and Greater Bay Bancorp and plan to add others slowly.


Post a Comment

<< Home