It appears that black-owned financial institutions learned some significant lessons in 1996. The conservative posture that had paralyzed black banks into zero growth in 1995, gave way to some very innovative and aggressive approaches to reaching new markets and boosting profits in 1996.
“Black banks are profitable, but the key is for them to continue to grow their earnings and to look at new revenue lines,” says Baunita Greer, president of Cromwell, Miller and Greer, a New York City securities brokerage firm. “That includes expanding their products and services (i.e., telephone banking, credit cards, investment securities), granting more loans and acquiring more branches outside of their communities.”
Greer’s assessment is on target. While merger-mania, acquisitions and consolidation of the mega-banks continue to be one of the most effective cost-cutting measures used by the banking community, black-owned banks are taking a different approach. They have adopted a strategy that has worked well in the business arena–forming alliances and partnerships among themselves and with white-owned financial institutions and Fortune 500 corporations. Chicago-based Seaway National Bank (No. 3 onthe BE FINANCIAL 25), which is leading consortium of women- and minority: owned banks to extend lines of credit to some of the nation’s leading corporations, is one success story.
Last year, some 417 financial institutions were trimmed, primarily the result of roll-up–the consolidation of several banks in different states that are own. by the same bank holding company While this type of activity is trimming the overall number of outlets of the mega-banks, black-owned institutions continue to be on the lookout for opportunities to purchase these discard branches, giving them entry to markets they don’t currently have access to. Liberty Bank and Trust Co. in Louisian and Consolidated Bank and Trust Co. in Richmond, Virginia (Nos. 9 and 16, respectively, on the BE FINANCIAL 25), have used this tactic with great success. As white-owned banks continue to merge, the strategy of acquiring cast-away branches of larger banks bodes well for black-owned institutions.
Pushing ingenuity to new heights, black-owned institutions, Founders National Bank of Los Angeles (No.14 on the BE FINANCIAL 25) and Nashville-based Citizens Savings Bank & Trust, are also cutting the cost of building traditional brick and mortar branches. Instead, they are opening boutique-style branches in supermarkets, strip malls and office buildings. The banks are doing all of this in an effort to position themselves as real service providers for what they feel are growing groups of consumers who are alienated by the continuing bank mergers and the fees that are evolving from them.
Will these strategies work?
“Each bank will have to determine its own strategic efforts and identify its own niche,” says Deborah ScottEnsley, CEO of Citizens Savings and chairman of the National Bankers Association, a Washington, D.C.-based trade group of minority- and women-owned banks. “Some minority banks may decide to focus on the church community and economic development. Others may concentrate on small business financing or mortgage lending. As long as it is a viable market that those minority institutions can properly serve, they will