Business as usual for Wachovia customers |
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Eckenrode: I think part of the value that Citi found in Wachovia -- and the others that were bidding on Wachovia found -- is the strength of the consumer franchise, the reputation in the marketplace that Wachovia has for customer service. Citigroup stated, that from the consumer point of view, they respect what Wachovia has been able to create in the marketplace and they want to continue to maintain a significant presence in Charlotte.
It's too early to tell how this aspect might play out, but it could end up being a situation similar to when JP Morgan Chase bought Bank One. What happened there is that the old Bank One organization ended up running Chase's consumer bank. I don't care to say for certain that's what's going to happen but, certainly, Wachovia has a great reputation for its consumer banking franchise and I would think that Citi would want to do whatever it can to capitalize on that.
Bankrate: It's been a stunning time in the banking industry; what's ahead?
Eckenrode: I think we're finally beginning to see the consolidation that we here at TowerGroup predicted eight months ago.
Bankrate: Is there more to come?
Eckenrode: Yes. It's hard to say (which banks) at the moment, but we're certainly seeing a separation of the strong from the weak. The roster of players shifts all the time between the strong and the weak. Six months ago, Citigroup was considered one of the weak; now they're portrayed as strong.
National City is another example. It's being recommended by some equity analysts as a bank that's in a reasonable position at the moment. The speculation is that any bank can hop from one side of the coin to the other.
Bankrate: What will the consolidation lead to in terms of the consumer banking landscape?
Eckenrode: If you look at most other developed banking markets -- the United Kingdom, France, Japan, Canada, Australia -- they all have a small number of national banking franchises with another layer of tier two and tier three banks beyond that. In the U.S., up until a few days ago, we had one national banking franchise, Bank of America, now we have three. When I looked at the Chase/WaMu merger, they were at about 9.82 percent of domestic deposits. Citi and Wachovia claim they're at 9.8 percent; and Bank of America is at about 10 percent; which is the regulatory cap on deposit concentrations. So all three are bumping up against that limit now.
My read on the situation is that we'll probably see a little more consolidation that will create another, maybe two, national banking franchises and then the midtier and the smaller community banks will continue to be successful in the marketplace.
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