Sovereign Bank’s orange and black lantern logo may be unfamiliar to Massachusetts residents, but the Pennsylvania bank aims to change that very soon. The bank has started an advertising campaign with radio spots during Boston Red Sox games and will soon blanket the state with billboards and television ads.
Sovereign Bank management often describes the company as a marketing company that sells financial products. The company will extend its banking franchise from Philadelphia to Cape Cod as it acquires 285 branches from FleetBoston Financial. By July, the Sovereign name will be on 185 Massachusetts branches.
Once the branches get signs on them, those all act as a billboard, said Sovereign Bank New England Chairman and Chief Executive John P. Hamill. Within a year, if not less, people will know a lot about the marketing efforts of Sovereign.
In the first branch acquisition at the end of March, Sovereign gained branches in Connecticut and Rhode Island. The package also included a former BankBoston branch and operations center in Dorchester, two Springfield branches, and branches in Chicopee and Westfield.
Sovereign’s new customers experienced some difficulties with the transition. BankBoston’s PIN numbers did not work with Sovereign’s four-digit system. A high volume of calls from customers resulted in many waiting on hold for extended periods of time.
The first week to two weeks of any conversion is not unlike rush hour traffic, Hamill said. Everybody’s trying to get to the same place at the same time.
The major systems, including check processing, loan systems and ATM systems, have been updated and have handled hundreds of thousands of transactions so far, he said. In the middle of last week, Hamill said the pace was returning to normal.
Sovereign will gain a market presence from New Hampshire to Connecticut, including more than 550 ATMs, in the divestiture package from the merger of Fleet Bank and BankBoston. The bank will double its branch network to 600, and will increase its asset base to $35 billion. The bank will gain $12 billion in deposits and $8 billion in commercial, consumer and mortgage loans, making the divestiture the largest in U.S. history.
The conversion is further complicated by the fact that the divestiture package is made of BankBoston branches in Rhode Island and Connecticut and Fleet Bank branches in Massachusetts and New Hampshire. Hamill said he does not anticipate the same ATM problem in Massachusetts, where Sovereign will gain Fleet branches and ATMs, because Fleet uses four-digit PIN numbers.
In early May, customers at the Eastern Massachusetts branches to be sold will receive mailings about their new accounts at Sovereign, which will be converted on June 16. Branches in Central and Western Massachusetts and New Hampshire will be converted on July 21.
As Sovereign introduces itself to New England customers through mailings, Hamill said the bank will point out that although the bank is a new brand in the area, many of the same employees will work with customers at the branches and loan centers.
In a way it’s like a start-up, but we have a wonderful team of people in the lending areas, branch managers and the operations area, Hamill said. Four thousand people will be coming on board in this major start-up.
Hampden Savings Bank President and Chief Executive Officer Thomas R. Burton said Sovereign has done a good job of retaining good local bankers in the branches it has opened in Western Massachusetts.
I think they’ll be tough competition, Burton said. There’s no doubt about that.
The $218 million-asset mutual savings bank is placing advertisements in local newspapers telling customers it can’t be bought in a merger because of its mutual status. The bank has received a steady stream of new customers unhappy with the BankBoston and Fleet merger. The changes have resulted in customer confusion, but Burton said most customers will probably give Sovereign a chance and move only if they experience problems.
They’ll put up with an awful lot before they move their checking account, Burton said.
Hamill, former president of Fleet Bank of Massachusetts, describes Sovereign Bank New England as a consumer and small business-friendly bank.
We’re geared towards serving the needs of the consumer and the needs of small businesses and middle-market consumers, Hamill said. I think people will have the sense of a small bank but it will have the power of the big bank behind it.
One banking analyst compared Sovereign’s marketing efforts to that of the former Boston-based USTrust, which was acquired this year by Citizens Bank. In Sovereign’s home market of Pennsylvania, the bank has positioned itself as a big bank with resources that also provides personal service, said Kevin Timmons, senior banking analyst for First Albany.
They’re doing everything they can to try to create a local identity, from the name to the management, and I think those are positives, Timmons said. But the reality is everybody knows they’re someone new to the market, and there’s risks of disruptions coming into the market.
‘Big Player’
In its first 10 days in New England, Sovereign Bank New England gained more than 1,000 new accounts. At the same time Sovereign was courting new customers, BankBoston customers received notices of the new fees they would be charged as customers of FleetBoston Financial. About 700,000 BankBoston customers that paid monthly account fees but did not pay fees for transactions will be charged 25 cents for checks and ATM withdrawals unless they can meet the required $2,000 minimum balance for the FleetOne Classic account.
Fleet is here in such size and scale that they almost take the retail base for granted, said John S. Carusone, president of the Bank Analysis Center in Hartford, Conn.
While Fleet still values retail customers, the bank’s fee income has grown because of non-banking businesses like Quick & Reilly, said Timmons. Sovereign should be careful to avoid receiving the same attention for its fees as Fleet has received in recent weeks, he said.
They obviously are going to be a big player here, Timmons said. They will be the most convenient choice for many consumers. They’ve got a shot at doing fairly well, but as a complete unknown they will have hurdles to overcome.
After converting the first set of branches, Sovereign management issued statements last week saying the acquisition exceeded expectations. The bank will issue more financial information about the acquisition when it releases first quarter earnings on April 19.
Because Sovereign financed the branch acquisition with debt financing, it will be important for the bank’s New England franchise to be profitable, Carusone said.
I think they have the potential to be a formidable competitor in the retail market, Carusone said. I think their ability to address the small business and middle market is still open to question.
When Sovereign completes its entry into New England, it will rank as the third largest bank in the region. But at $12 billion in assets in New England it will still trail behind Fleet’s $190 billion and Citizens Bank’s $29 billion.
I think Fleet did a masterful job in picking a competitor, Carusone said.