Author Archives: mronan

BMO completed the acquisition of M&I Bank, commits $5 billion in small business lending

The Minneapolis / St. Paul Business Journal reported that BMO (whose U.S. bank arm, Harris Bank was the 34th largest U.S. bank by deposits at the end of 2010) had completed its acquisition of M&I Bank (32nd largest), and immediately made a commitment to lend $5 billion to businesses.

This acquisition comes as large bank M&A deals and rumors have been on the increase:

  • PNC Bank (5th largest U.S. bank by deposits) announced the acquisition of RBC Bank (44th largest)
  • Capital One (10th largest) announced the acquisition of ING Direct (17th largest)
  • HSBC (11th largest) has put its upstate New York branch network up for sales
  • BB&T (12th largest) has made no secret of the fact that it is looking bank acquisitions
  • BNP Paribas is considering selling off Bank of the West (24th largest)

There is the expectation that this bank M&A activity will  continue, as some banks have emerged from the financial crisis much stronger than others.  More insights into banks’ relative performance will be seen in the coming weeks, as they publish quarterly financials.  In addition, some banks will use the 2Q financials conference call to clarify their position regarding acquisitions or sales.   In addition, there is the sense that, given the 8,000 banks in the U.S., significant consolidation is necessary in order to create a more efficient industry.

From a marketing perspective, these acquisitions create great opportunities for the combined bank, in leveraging the relative strengths of both banks.  They also, of course, create some significant challenges, in such areas as:

  • Branding (including decision on whether to retain one or more brands, or to create an entirely new brand, logo, tagline and positioning for the newly-combined company.  In addition, any decisions of rebranding have significant cost implications for branch signage, collateral, etc.)
  • Products and pricing
  • PR (in particular as these acquisitions typically result in branch closures and headcount reductions)
  • Customer retention (as customers are susceptible to competitive approaches during the transition process)
  • Sales and service channel and systems integration

Latest Nilson Report highlights recovery in small business credit card spending

The Nilson Report has published its annual rankings of the leading U.S. commercial card issuers (by spending volume).  These ranking are broken out into various commercial card categories, such as purchasing cards and small business credit cards. A quick analysis of The Nilson Report data by EMI uncovered the following trends in small business credit card and small business debit card volume:

  • Small business credit card volume rose 6% in 2010, following a decline of 9% in 2009
  • Of the 20 leading small business credit card issuers, only one (Bank of America) reported a decline in volume between 2009 and 2010
  • Small business debit card volume grew by 16% in 2010, compared to a rise of just 4% in 2009
  • Of the top 20 small business debit card issuers, only one (TD Bank) reported a decline in volume in 2010, and 10 of the top 20 reported annual increases of more than 20%

Emergence of fixed-rate student loans

As we enter the main student lending season, two leading banks–U.S. Bank and Wells Fargo–have launched fixed-rate pricing on student loans.  The rate on the U.S. Bank Fixed Rate Student Loan is 7.99%.  Wells Fargo has fixed-rate pricing on four of its student loans, with rates as low as 7.75%.  With this new pricing, the two banks are aiming to differentiate themselves from student lending competitors.  They are also playing on a growing expectation that U.S. interest rates will rise in the coming months.

As these banks have a high profile in the student market, other leading private student lenders will be tempted to follow suit with their own fixed-rate offers.  And the second quarter financials of these banks will be scrutinized in the coming weeks for any indications of a rise in student loan originations.