Private Banking for the Masses?
Steinborn, Debbie, ABA Banking Journal
You don't need a pocketful of millions" could well be Eastern Bank's antra, ever since the inception of its private banking department six years ago.
Offering personalized financial services to the top 1% of the marketplace is nothing new--banks across the country have been doing so for years. But the private bank at Salem, Mass.-based Eastern Bank is different. Rather than compete with money centers for their high-end clientele, Eastern Bank's target market is professionals who account for the top 3% of the Boston marketplace. According to the bank's criteria, a private banking candidate should earn more than $100,000 or have a household income of $150,000 and a net worth, less residence, of over $250,000.
These less stringent criteria came about because the bank recognized a need for more personalized banking services for high net worth individuals at the "lower end" of the asset scale. It's also a way for the $1.7 billion-asSets bank to differentiate itself from the competition.
"Relatively speaking we are a very small private banking department, in a highly competitive banking marketplace," says Susan Parent, vice-president, private banking. Indeed, the bank faces competition "from the likes of Bank of Boston, Fleet, and even some of the nonbank investment centers--which are popular among the upwardly mobile professionals in the city of Boston," adds Ron Johanson, marketing senior vicepresident at Eastern Bank Corp., the bank's holding company.
Nonetheless, in its first six years of business Eastern Bank's private banking department has developed more than $10 million in deposit accounts and a loan portfolio of over $20 million. The private bank currently serves 250 clients. Last year the department booked more than $5 million in new loans. (Net loan growth was $3 million, however, due in part to some loans being reassigned to other divisions.)
A medical specialty
A fair proportion of its business overall comes from the medical community Eastern Bank historically has served in Boston's North Shore market. Other departments such as Trust and Retail "have always served the medical profession in the North Shore area," notes Parent, adding that many of these professionals built up their practices and their financial "clout" while customers of the bank.
In the late 1980s, Eastern Bank recognized that in order to maintain and build on that niche market, it would do well to provide more personalized banking and investment services to medical professionals. With the formation of the private bank, "We now serve as private bankers for attorneys, corporate executives, and other individuals as well, but the banking needs of the medical professionals in and of themselves have offered our department a wealth of opportunity," explains Parent.
And though the banking needs of the medical market don't differ greatly from those of other professionals, preferences do, she adds. For instance, physicians are often advised by their CPAs to set up lines of credit to even out the flow of receivables in their practices, "even though [their practices] are usually credit-worthy on their own," Parent says.
Another example: in the past physicians sometimes would apply for a personal line of credit through Eastern Bank's retail division. Now, "we can coordinate that application for them, and often we will exceed the retail bank's maximum lines for our clients," Parent says. An unsecured line of credit of $25,000 may be extended to $50,000 for a private banking client.
Such modification of previously developed products is central to the private banking department. Rather than inventing new products, the officers often tailor existing credit products to meet a client's specific needs. And considering its limited resources--the private bank staff is only three people, two officers and an assistant--the ability to pool resources from divisions such as Retail, Trust, Commercial Lending, and Mortgage Banking, certainly has contributed to the private bank's success. …