Rivals eye Wachovia customers

Although it leads in market share locally, customers may believe it is less safe

Wachovia's well-known financial woes and its pending acquisition by Wells Fargo are providing an opportunity for competitors to do their darnedest to capture some of the Charlotte bank's customers.

"You have one of the best franchises in the Carolinas being acquired by a West Coast bank," said investment banker Bill Wagner of Howe Barnes Hoefer & Arnett in Raleigh. "It's an opportunity for all banks."

Wachovia is an especially enticing target in the Triangle, where it ranks first overall in market share based on deposits -- No. 1 in the Raleigh-Cary metropolitan statistical area and No. 2 in the Durham MSA -- according to the Federal Deposit Insurance Corp.

"You hate to think you are profiting when someone else is down, but yes, it will benefit us," said Gregg Strickland, CEO of Patriot State Bank in Fuquay-Varina.

Wachovia, as well as most of the other large banks in the area, has already seen its market share slowly erode in recent years as expansion-minded community banks have encroached on its turf.

"With our [leading] market share, we always have a target on our back," said Jack Clayton, Wachovia's regional president. He also contends deposit data don't give the complete picture, because they don't include money that customers invest through Wachovia.

Industry analysts say it's unlikely competitors will try to lure Wachovia customers by substantially raising interest rates on deposits or lowering fees. Nor are they likely to resort to gimmicks.

"What they are selling is security and strength," said Buddy Howard of Equity Research Services, a Raleigh firm that tracks the banking industry. "They are not going to get a customer to deposit a bunch of money with you for a free toaster, if [the customer] doesn't think their money is safe."

Current ad campaigns by several local banks pointedly focus on financial strength, safety and stability. The ads don't mention Wachovia, but the underlying message is that "these are things that do not apply to ... the Wachovia of 2008," Howard said.

A SunTrust ad that appeared in The News & Observer and elsewhere even goes so far as to say, "When you're ready to switch accounts, we're here to help."

John Stallings, who heads SunTrust's Central Carolinas region, said the campaign isn't aimed solely at Wachovia customers. Rather, he said, the volatility in the banking industry is putting a lot of customers in "shopping mode." SunTrust is No. 1 in market share in Durham and has more branches in the Triangle than any other bank.

Stallings said that, beginning last year, SunTrust also stepped up its efforts to call on wealthy individuals and businesses who aren't clients in hopes of converting them.

"The way we win business is where we're in front of clients and they have a chance to hear our story, our capabilities, our expertise, etc.," Stallings said.

About 1 percent lost

Certainly some Wachovia customers have sought an alternative. On Sept. 26 alone, as rumors swirled about Wachovia's future, the bank lost $5 billion in deposits in a "silent run," or about 1 percent of the bank's $448 billion in deposits nationwide, according to court filings.

"A lot of the uninsured money was leaving Wachovia a month ago," said Tony Plath, a finance professor at UNC-Charlotte, referring to deposits exceeding the amount insured by the FDIC. That outflow, he added, has benefitted competitors of all sizes.

But Wachovia's Clayton said that, in the Triangle, most of the deposits the bank lost -- the bank isn't disclosing how much -- didn't migrate to the competition.