PNC battling to keep NatCity's private banking business

December 29, 2009

PNC Financial is still digesting its $5.6 billion acquisition of National City Corp., but a quiet battle almost certainly is under way over its lucrative private banking clients.

Pittsburgh-based PNC says it’s premature to discuss how it plans to retain the wealth management clients until the changeover is complete next summer.

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However, it’s a safe bet that PNC is thinking hard about how to keep them from jumping to competing firms, and just as safe a bet that rivals are looking to lure them away.

“The key to either getting someone else’s business or retaining your own is to get the confidence of the client and become the trusted adviser,” said Lawrence A. O’Connor Jr., executive director of the Butler Business Accelerator and president of the former Bank One Indiana before it was purchased by New York-based JP Morgan Chase & Co. in 2004. “If you don’t do that, somebody will.”

PNC snapped up Cleveland-based National City a year ago after it became bogged down in the subprime mortgage crisis.

When the merger was announced, National City was the second-largest bank in the Indianapolis area, based on employment; it was fourth-largest by number of branch locations and fifth-largest by deposits. Seventy-seven of the 172 branches National City operated in Indiana are in the Indianapolis area.

Indianapolis figures aren’t available for PNC’s private banking activity. However, private banking generated $35 million for the merged bank in the third quarter. All told, private banking churned out 4.8 percent of PNC revenue but a healthy 6.3 percent of its profit.

Management of investment and retirement accounts as well as estate and general tax planning issues are just a few of the services that fall under the private-banking umbrella.

Private clients are lucrative because they demand additional services that generate higher fees. Those fees are prized by banks as they look for profits at a time they’ve tightened lending in light of the credit crunch.

PNC spokesman Alan Aldinger said “appropriate changes and enhancements” likely will be introduced before summer—just before changing the names in Indianapolis.

It is “too early, really, to go into detail about plans for our clients,” Aldinger said in an e-mail. “As of now, National City Private Client Group in Indianapolis is status quo.”

It’s when the name is changed that clients would be most likely to walk away, said George Farra, a chartered financial analyst and principal with locally based Woodley Farra Manion Portfolio Management Inc.

National City’s private-banking arm likely emerged unscathed, said Nadine Givens, director of the local office of BKD Wealth Advisors LLC, a subsidiary of the Springfield, Mo.-based accounting firm BKD LLP. Actually, any lingering doubt about National City could be buffered by PNC’s financial stability.

“In uncertain times, [clients] will leave,” said Givens, a former market manager for JP Morgan’s private wealth management group. However, she added that National City’s wealth management business was “as good as it gets.”

Michael Bosway, CEO of locally based City Securities Corp., suggested a bank’s troubles can overshadow its talent, especially in troubled times. Some clients might question the stability of National City, and ultimately PNC, due to the bad news about subprime mortgages.

“If there are issues that are well-publicized that are going on at the company, then that company better get its act together, because clients are going to think twice about staying,” Bosway said.

To prevent a massive customer exodus, some experts argue the best move—or perhaps non-move—PNC can make is to keep its current crop of advisers. That’s because relationships that advisers build with customers often serve as a barometer for an institution’s success.

“It’s a me-too industry,” said Mark Damer, president of the wealth management division at the local office of Chicago-based David A. Noyes & Co. “What really differentiates this business anymore are the people involved, and the clients tend to become very loyal and attached to that individual.”

To be sure, loyalty can reap additional clients who may be drawn to a particular bank or firm by testimonials from peers. Business typically is built by “word-of-mouth” advertising, said Damer, who has had customers follow him from previous jobs at other investment firms.

Any business welcomes a referral. But private client referrals carry much more clout, said BKD’s Givens: “They’re your leaders in the community. They’re the influential, the who’s-who in Indianapolis.”

Damer admitted he will be “anxiously watching” to see what initiatives PNC pursues to embrace existing clients, as well as to entice new ones.

“It’s a competitive place,” he said. “We’re all trying to do the same thing.”

IBJ reporter Peter Schnitzler contributed to this story.



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