For weeks leading up to its Indianapolis market conversion, Pittsburgh-based PNC Financial Services has draped temporary awnings with the name National City over all its bank branch signs. Underneath, the permanent signs boast the PNC logo, ready for instant unveiling Monday.
Executing the rest of its transition as smoothly will go a long way toward deciding whether PNC gains or loses market share in central Indiana. Any mistakes will give competing banks an opportunity to pounce on its customers.
“It’s all about execution,” said bank expert John Reed, president of the investment banking group at Chicago-based David A. Noyes and Co. “If nobody stumbles and they did everything right, it should be pretty transparent to the customer. But there are lots of opportunities to stumble.”
PNC bought Cleveland-based National City in 2008 at the height of the financial crisis with the help of government bailout loans. National City has long been Indianapolis’ No. 2 bank. Thanks to the deal, PNC now has 89 branches, 149 ATMs and about 1,100 employees in the Indianapolis area.
According to the Federal Deposit Insurance Corp., as of June 30, 2009, PNC had $4.7 billion of deposits in the metropolitan statistical area, or a 16.9-percent market share. New York-based Chase, the local market leader, had $6.9 billion in deposits and a nearly 25-percent share. Cincinnati-based Fifth Third Bank is a distant third in Indianapolis, with $2.7 billion in local deposits and a 9.9-percent share.
PNC, now the nation’s fifth-largest bank with $286 billion in assets, 2,600 branches, 56,000 employees and operations in 15 states, converted National City in four waves. Indiana and its 137 former National City branches statewide are part of the last changeover, which this weekend will also convert customers in southern Wisconsin, Illinois and St. Louis—1.4 million in all.
Steve Stitle, who led the local territory for National City, remains PNC’s Indianapolis regional president. He was part of a regional executive team PNC retained, with the exception of the Wealth Management division. Stitle said the conversion will be “seamless” for customers, and that PNC’s goal is to be the “best bank in the market.”
“My name is the same, and I’m still the longest-serving CEO of any Indianapolis bank. And the team is still the same,” Stitle said. “We’ll tell the story about PNC, and it’s a very good one.”
Much of the switch has been happening behind the scenes, with a back-office conversion well before the formal June 14 conversion date. On the front lines, Stitle said he’s emphasized maintenance of relationships, with the same tellers or salespeople working with the same customers.
That’s important, Reed said, because some customers inevitably will miss or ignore PNC’s advertising as well as repeated formal notifications, e-mails and welcome packages they receive in their mailboxes.
If a customer’s favorite teller handles any hiccups with speed and ease, Reed said, that’s great. But if not, the tiniest account problems, IT delays or unexpected fees can quickly generate ire and prompt customers to move their business elsewhere.
PNC needs to avoid negative word-of-mouth, Reed said. Customers are less forgiving than ever after a deep recession that many feel big banks helped create. Fairly or not, bank customers these days can move quickly from an indifferent to an irate mindset, painting all bankers with the same broad brush.
“When you lose Mrs. Jones in a rage, she’s going to tell her neighbors, and maybe poison the well for a whole bunch of people,” he said. “It’s delicate.”
PNC understands the challenge well, and will attempt to increase feelings of goodwill through its charitable contributions. Stitle said PNC’s commitment to Indianapolis will be as big or bigger than National City’s. He emphasized PNC’s “Grow Up Great” 10-year, $100 million initiative that kicked off in 2004. Focused on early-stage development, its gifts help prepare children under age 5 for formal education.
“We’ll get our share of that,” Stitle said.
Its size and financial strength give PNC some real tactical advantages, which Stitle plans to leverage locally. He pointed out PNC has been able to keep a loan-to-deposit ratio under 100 percent while other banks have struggled. That means it isn’t borrowing funds to lend, allowing PNC to make more and larger loans at more attractive terms.
And while competitors are likely to attempt to paint a different picture about an approval process that ends in Pittsburgh, Stitle said PNC’s local market authority remains almost entirely delegated to him and his Indianapolis team.
“Virtually all decisions that are customer-involved are locally made, which gives us a competitive edge. And customers will note that,” Stitle said. “They’ll be talking to people who are making decisions.”
After decades of bank mergers, most customers are used to these types of conversions, said former Bank One Indiana CEO Larry O’Connor. So PNC won’t be labeled an interloper just because its headquarters is in Pittsburgh.
“It’s all in the execution,” he said. “How people on front lines work and how systems work. Do they benefit the consumer?”
PNC’s competitors, large and small, are also aware of this weekend’s National City conversation. And they’ll be watching PNC’s execution closely, too. Just as PNC has attempted to anticipate every contingency and possible problem in advance of the market conversion, so have most other banks in the market.
“I’d suspect the more alert competitors have a war room where they’re strategizing where might PNC mess up, and how can we exploit that to our advantage,” Reed said. “A lot of people are thinking any change is an opportunity.”