Considering the recent announcement by PNC Financial Services Group of plans to acquire RBC Bank, and more speculative bank mergers reported, The Birmingham Business Journal turns to UAB Business professors Andreas Rauterkus and Stephen Yoder for their expert opinion on how the local banking sector may be affected.
UAB Assistant Professor Stephen Yoder told BBJ that the biggest effect from PNC’s entry into the Birmingham market may be felt outside the traditional “brick and mortar” bank branches. He said PNC has been innovative in its consumer banking offerings, aimed at attracting deposits outside of a branch network. One example is PNC’s Virtual Wallet, targeted for Generation Y customers and others embracing technology, he said. “Virtual Wallet could provide some interesting competition for the existing banks in the market, even without a large branch network here,” Yoder said.
In response to the possibility that BB&T Corp. may be looking to buy Synovus Financial Corp., UAB Assistant Professor Andreas Rauterkus, said if BB&T were to buy Synovus not only would it greatly improve its market share in Birmingham, but it would make the bank a real competitor for the “big three” – Regions Bank (NYSE: RF), BBVA Compass and Wells Fargo. “I think the greatest threat would be to Regions being by far the weakest bank in that group,” he said. “Regions is the weakest of the group because they are performing the worst and still being discussed as a take-over target themselves.” Rauterkus added that smaller banks might feel some pressure, as well. “It seems that Birmingham could become a battleground for those large banks, which would also probably crowd out a lot of the smaller banks,” he said. “Smaller banks might not be able to compete with these major players that have significantly lower costs of capital and thus, can underprice their small competitors in the commercial loan market.”
Yoder said a merger between BB&T and Synovus would be a merger between two like-minded banks because both have had strategies of operating as a series of community banks. “Such a similarity in local decision-making and relationship-building could mean that an integration of the two would be relatively smooth,” he said.