Huntington Bancshares arrives in Pittsburgh this month ready for a struggle.
Its $3.6 billion acquisition of Sky Financial Group grants the Columbus, Ohio, firm instant status as the region's seventh-largest bank, with 65 local branches, $1.8 billion in deposits and a 3 percent market share in the Pittsburgh metropolitan area.
But a 3 percent market share is only the start, pledges regional President Vincent Locher.
"We want to go from three to five to seven to 10," he said, pushing ahead of Dollar Bank and closing the gap with the top three of PNC, National City Bank and Citizens Bank. "I would love to be No. 4 in market share. Dollar has $2.8 billion of deposits in this market. We are a billion dollars away from leapfrogging Dollar. I think we can do that organically and strategically."
Strap yourself in for The Battle of the Banks, Part II.
Part I played out in the late 1990s and into 2001, when National City acquired Integra Financial and Citizens Financial took over Mellon Financial's retail branches. PNC emerged with 30 percent of local deposits, compared with 17 percent for National City and 11 percent for Citizens (The Bank of New York Mellon Corp. still has 10 percent via Mellon's longstanding wealth management accounts).
Now the midsize and small banks operating a level or two below the Big Three are looking for acquisitions, rolling out new advertising designed to raise their profiles (especially in Allegheny County), bidding as much as $1 million for available branch locations and forestalling the rise of new rivals by poaching clients and workers -- all in a metropolitan area that is not adding new population and at a time when a tough interest rate environment is weighing on earnings.
Everyone involved in this second wave of competition talks up the customer service benefits of banking at a smaller institution but acknowledges the possibility of more consolidation.
"There are too many players bidding for a finite pie," said Huntington's Mr. Locher, who also ran the region for Toledo-based Sky and considers Pittsburgh "one of the most overbanked cities" in the country. "The bank that wins is the bank that executes its plan."
Huntington's plan begins on Sept. 24, the day Sky branches change their names and the blue "Sky" sign atop the Centre City Tower will be replaced with Huntington's neon-green logo.
Along with Huntington -- which is planning an eight-week advertising campaign this fall using the tag line "A bank invested in people" and a half dozen new branches in the next two years -- another Ohio financial institution moving aggressively is Cincinnati-based Fifth Third Bank.
After a quiet regional debut in 2004 (as of last summer, Fifth Third was No. 36 in deposits, with only .20 percent of the market total), regional president Jay Ferguson III now hopes to add eight to 10 branches a year over the next three to five years, for a total of 55 or 65. Later this year branches are opening in Shadyside, East Liberty, Upper St. Clair and Cecil, following a recent Bloomfield opening on Liberty Avenue.
Fifth Third's aggressive push for new locations "has put pressure on this market," driving up costs of available land, said Huntington's Mr. Locher. Huntington -- which is opening a new McKnight Road branch in Ross on Sept. 24, finalizing a lease for new spot in Pine and holding a contract to buy another site in Seven Fields -- is now paying $1 million for dirt and spending $300 to $400 per square foot on construction, for a total of $2.5 million.
"It is kind of like the drugstore chains paying big numbers for the 'A' corner," said Mr. Locher, who also is looking in Squirrel Hill, Shadyside, Oakland and Peters. "If you don't react quickly enough there is a good chance one of our competitors will get them."
Other than Fifth Third, the banks competing for many of the same expansion sites are Indiana, Pa.-based First Commonwealth Financial Corp., Hermitage-based First National Bank of Pennsylvania and Indiana, Pa.-based S&T Bancorp., all firms from outlying counties trying to push their way into the core and raise their profile through new ad campaigns:
S&T, the region's 11th-largest financial institution, a year and a half ago hired former Steelers running back Jerome Bettis as its corporate spokesman and recently finished a fourth advertising spot due to air this fall.
First National Bank, the region's No. 8 financial institution, recently added Steelers President Art Rooney II as one of its directors, and the Mercer County bank now has 55 branches in the Pittsburgh metropolitan area and $1.5 billion in deposits -- all added since 2002. Its goal is $2 billion in local deposits and more advertising in the Pittsburgh market, "where we think we have an opportunity to get some market share," said CEO Stephen Gurgovits.
First Commonwealth, the region's sixth-largest bank, began its biggest ad campaign of the last three decades in May, with print, billboard, TV and radio spots throughout the Pittsburgh area. The campaign, rotating around the line "Tell me more about . . ." continues this fall. "Because we are the fairly new name on the block, we need to let people know we are here and we are different," said First Commonwealth Chief Executive Officer John Dolan.
First National and First Commonwealth also are doing what they can to make Huntington's entry more difficult, calling on existing Sky employees and customers and playing up the potential confusion of a name change.
"We started doing that the day they announced the merger," said Mr. Gurgovits, the CEO of First National, claiming his people were able to pick up new corporate clients and workers. "What we found was any time there is a merger like this, there is always some disruption of employees and customers. Regardless of what people say, it is never like it used to be. It is always different and we want to capitalize on that."
S&T Senior Vice President Rob Jorgenson acknowledges the "war" among small and mid-size players in the Pittsburgh market but he refuses to ask his people to play up the confusion of a name change to win new business. "It is not part of our culture," he said, adding, "We are just trying to keep our nose to the grindstone."
Another small bank executive not concerned about losing customers to the new competition is Andrew Hasley, chief executive officer of the nine-branch Allegheny Valley Bancorp. in Lawrenceville. "Pittsburgh is not a city that grasps change rapidly," he said. "This is still an old style community with an old population that doesn't like change."
Playing up his small bank approach, Mr. Hasley offers all customers his cell phone number and claims to be available 24 hour a day. "You try to get the CEO of Huntington on the phone. ... That is our competitive advantage. That is what I sell."
When people ask, "'Are you scared," Mr. Hasley said he responds by saying the arrival of Huntington "is the best thing that can happen to us. ... As I said to my board, the more this happens, the better."
The influx of new players "just means we have to be better at our game," said Patty Perhacs, a senior vice president with Evans City-based NexTier Bank, the region's 16th-largest financial institution. NexTier changed its name in 2005 from Citizens National Bank following a four-year court fight with Citizens Bank of Pennsylvania over the rights to the Citizens moniker (a case it won). It still is working to establish the new name in the minds of potential customers.
"It is always a concern where there are more competitors in a not-growing market," she added. But, "if anything, it will keep us on our toes and keep us sharp."
The banks with the best chance of surviving the shakeout in the small to midsize category will be those that provide "superior service," and the "best product at the lowest cost," said Brian Koble, a senior research analyst with Downtown-based Hefren-Tillotson Inc. He noted that 40 financial institutions in the area have a market share under 1 percent.
He predicts a "gradual and steady transformation" of the sector.
Huntington, the newest entrant, pledges to run its operations here as a local bank would, making all decisions about customers locally. Is that enough to surpass Dollar as the region's No. 4 bank?
When asked, Dollar Senior Vice President Joseph Smith said his company would respond aggressively. "I do not think we are going to lie down and let anyone take our market share away," he said.
Dan Fitzpatrick can be reached at email@example.com or 412-263-1752.