Stand at the entrance of Webster Bank’s slick new branch in downtown Boston, and look right: You’ll see Citizens, Bank of America and Wainwright Bank lined up down the street. To your left is Sovereign Bank, and farther down the way, yet another Bank of America sign.
Waterbury, Conn.-based Webster seems to have a lot stacked against it in its move to Boston’s 100 Franklin St., including heavy competition and a lack of local name recognition. It also bears the burden of rocky recent quarterly figures – the bank’s parent company reported a $19.3 million loss in the third quarter and a $61.9 million loss through Sept. 30.
“Webster has a lot ahead of them, to gain reputation, develop their brand, and win confidence with people,” said Tom Grottke, president of Connecticut-based Northeastern Banking Services Group. Analyst Kate Monahan, of Boston’s Aite Group, called the city “tougher than the typical market.”
But analysts aren’t dismissing the move as foolish. Indeed, they see a variety of potentially clever strategies at play in the new location, which opened for business Nov. 16.
“What a way to charge-up the organization, to make a move like that,” Grottke said.
Webster has had a rocky year on paper, but a bold move into Boston provides a shot in the arm for the profitable parts of the bank, including a strong commercial arm.
“They can be sucked into the downer of the troubled bank,” Grottke said, “or re-oriented by management to go win.”
Webster’s losses in the third quarter stem from charge-offs and nonperforming loans, which dragged the bank down despite a $115 million boost from investor Warburg Pincus this summer and fall. Grottke says Webster has pressure from asset quality and earnings issues, but that “a huge chunk” of the rest of the bank is vibrant. Those healthy parts can provide the engine to right the entire ship.
Looking To Sell?
Frank Farone, managing director with Newburyport’s Darling Consulting, saw another possibility in Webster’s move.
“They’re leapfrogging, looking to set up a marquee spot in Boston, so they can ultimately sell the bank,” he said. “That would be my one and only hunch as to what the game plan is long-term.”
Webster already has 20 branches in southern Massachusetts, and now, Farone said, the bank can point to a solid corridor of locations from Boston to Waterbury, which makes it more attractive to buyers. And as CEO and president Jim Smith nears potential retirement age, he might be looking to sell.
Joe Savage, Webster’s senior vice president of commercial lending, scoffed at that.
“People have been predicting we would sell ourselves for about 14 years … That’s what the people at [now-sold] Fleet Bank used to say about us,” he said.
No, Savage said, the plan is simpler than that: “You can’t be ‘New England’s bank’ and not be in Boston.”
Webster considers itself a flourishing regional bank, and needs that metropolitan presence, he said. Eventually, Webster plans to open more locations in the region. With the $115 million from Warburg Pincus, he said, those plans will likely come to fruition sooner than they otherwise would have.
Perfect Timing
Although Webster has been laying the Boston groundwork for years, Savage said the timing worked out perfectly. As major national banks “pull in their horns” to deal with financial and political troubles, regional banks such as Webster can scoop up their employees, as well as their market share. To man the Boston branch, he added, Webster made sure to find seasoned Boston banking talent.
The branch, described as a sort of “mini-headquarters” by spokeswoman Brenda Greene, features middle-market banking, asset-based lending, government finance and more, in addition to being a retail consumer branch.
Analysts speculated that Webster would play up its competitive commercial banking and wealth management arms. Savage confirmed that, saying Webster will promote its regional status, catering to small- and mid-sized businesses.
“Companies with revenues of $5-$50 million get a warm welcome (at Webster),” he said, whereas such companies may be considered disposable clients to national and multi-national banks.
To get the word out, Webster is planning a ribbon-cutting bash Dec. 9, including a cocktail reception for customers, potential customers and dignitaries, Greene said.
Jim O’Meara, vice president of commercial lending, said the bank has a marketing launch planned that includes signing local sports celebrities as spokespeople.
