By Kantrow, Yvette D.
American Banker , Vol. 156, No. 135
Competition Will Heat Up in New York
A combined Chemical Banking Corp. and Manufacturers Hanover Corp. could significantly realign the nation's biggest and most competitive urban banking market and pose a serious challenge to Citibank, the long-standing market leader.
Chemical Bank and Manufacturers Hanover Trust Co., currently third and fourth in the New York area by key measures of retail market share, together would become a strong second to Citicorp's lead bank, according to Payment Systems Inc., a market research company based in Tampa, Fla.
The two merging banks would also surpass Citibank in total branches, with 436 in New York and 132 in New Jersey. About 70 overlapping branches are slated to be closed in the near term. Citicorp, by comparison, serves the region from 250 locations, all in New York State.
Chemical and Manufacturers officials claim they would be No. 1 if the region's market share calculations include consumer, small-business, and mid-size corporate relationships. Their total would be, 40%, compared with Citibank's 29%.
"This is without a doubt the most serious competitive threat to face Citibank in the past 20 years," said Allen R. DeCotiis, president of Payment Systems.
Growth of Citicorp's retail bank has slowed in recent years as local competitors more aggressively pursued the low-cost deposits and high-interest loans that characterize the consumer business. But is market share lead has remained wide.
Citibank Leads Market
As of March 31, according to Payment Systems, Citibank led the market by having at least one banking relationship with 1.6 million households, or about four out of 10 Chase Manhattan Bank followed with 900,000 households, or 22% of the total.
By adding their household figures - 696,000 for Chemical and 607,000 for Manufacturers Hanover - and eliminating about 100,000 of overlap, the expanded Chemical Bank would do at least some business with 1.2 million households, or 29%.
While Chemical would trail Citibank by 10 percentage points in household penetration, it would be within four percentage points of Citibank's 14% share of total accounts in the New York market.
Citibank would hold onto a slim 12.46% to 11.11% lead in share of total depository accounts, and a 5.85% to 3.4% lead in mortgage accounts.
Of households with at least one credit card, Citibank claims 36% to Chemical's 20%. Chemical would be the sixth-largest credit card bank in the U. …