Magazine article American Banker

Success Formula: Narrow Your Focus

Magazine article American Banker

Success Formula: Narrow Your Focus

Article excerpt

Banks used to aim to be all things to all people. In the past decade, some highly successful banks have demonstrated disciplined customer focus.

For TCF Financial Corp. in Wayzata, Minn., the sweet spot is the blue-collar family. TCF lacks extensive wealth management services but offers annuities and mutual funds. Branches are conveniently located in middle-income neighborhoods; they are not flashy, and many are in supermarkets. Distribution is designed to capture share.

The goal is fee income, not high margins. The bank does not care that its average checking account balance is $600. Most retail banks would lose money on such low balances, but it works for TCF, given its delivery cost, which is very low, and its fee structure, which is high and custom-tailored.

Commerce Bancorp Inc. of Cherry Hill, N.J., targets upper-middle-income households. Branches are large; it buys high-end real estate in premium markets, building its brand around convenience.

Fee income per dollar of deposits is much lower than TCF's, but profitability is excellent. Commerce makes money by attracting larger deposits and not overpaying for them. Rates are reasonable.

Service may not be a top priority, but it is not neglected. Free items are not checking accounts but unusual things like coin counters, which attract children and parents who want to teach their kids to save. The product line is broad enough to fully serve this market, and the pricing reflects that approach.

Sterling Bancshares Inc. …

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