Magazine article American Banker

Banks Urged onto Finance Company Turf

Magazine article American Banker

Banks Urged onto Finance Company Turf

Article excerpt

Bankers at the National Consumer Credit Conference sponsored by the American Bankers Association were warned that they had better start operating more like finance companies or lose market share.

Such companies have increasingly been making home equity loans and "B" and "C" mortgages. They "are booming because they are meeting the needs of customers that have been spurned by banks," said James C. Clymer, vice president of Dial Bank, a Norwest Corp. subsidiary based in Sioux Falls, S.D. "They do their homework." Patrick Doran, senior vice president of PNC Bank, Pittsburgh, urged bankers to change the way they approach consumer lending - or face "dying on the vine."

"I think the old cliche, 'If it ain't broke, don't fix it,' is passe," Mr. Doran said. "You have to be prepared to adjust."

Banks need to change more, he said. Banks and thrifts are losing market share in nearly every area of consumer lending. In outstanding revolving consumer loans, for example, banks had a 49% share in 1993, down from 59% in 1983, according to First Manhattan Consulting Group.

"Success has never seemed more elusive" than it does today, he said. Mr. Doran's solution: Specialize.

Specialization "seems to be a proven route to growth," he said.

Banks should not try to be financial supermarkets, catering to all customers, he said. Instead, they should focus on products that they service well and that are profitable.

"We have to be more adept at finding those products that mean something to consumers," Mr. Doran said.

And will banks succeed?

"I am not pessimistic," he said. "But I do think we are going to have to find some way to grow our success and not just rely on the cost side of the equation."

Leonard A. Zych, president and chief executive of Chemical Financial Services Corp., Cleveland, said that lending to borrowers with damaged credit is a specialization more banks should consider. …

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