Tupelo — Back in the 1990s, the banking industry was seemingly mesmerized by blockbuster deals that glorified size and geographic scope. Big-city markets were “in” while smaller locales were “out,” and pundits were reading obits for the full-service brick-and-mortar branch.
Just a few years later, the competitive landscape has changed dramatically. High-profile mergers that promised great “synergies” disappointed in their delivery of results as cultural clashes and integration snafus emerged. A slowing economy underscored organizational weaknesses at many of the nation’s megabanks and served as a wake-up call for those that experienced an outmigration of business-and talent-to regional competitors who kept their eye on the customer with a disciplined strategic focus. And the much-maligned branch didn’t perish after all.
As CEO and chairman of the $10.8-billion-asset BancorpSouth Inc., and as a former national president of the American Bankers Association, Tupelo banker Aubrey Patterson is acutely aware of the competitive demands of today’s financial services environment. In a recent interview with the Mississippi Business Journal, Patterson shared his insights on broader industry trends, as well as the importance of strategic focus and discipline in a constantly evolving financial services climate.
While the industry’s merger and acquisition pace experienced a slowdown after its 1990s heyday, 2003 and 2004 experienced a resurgence in activity. Given merger and acquisition mishaps of the past decade, many industry observers are hoping that the recent wave of consolidation will result in a more realistic assessment of the merits of size and scale, as well as subsequent issues such as cost savings, efficiencies, integration schedules and revenue synergies.
“If there were lessons to be learned by companies that were extremely aggressive in their merger and acquisition programs, it was that putting two companies together doesn’t necessarily make a better company,” Patterson said. “Some mergers seemed to be more about how to put the systems of two large companies together rather than serving customers in a particular region better.”
While BancorpSouth is no stranger to merger activity — it recently completed acquisitions of Premier Bancorp Inc. of Brentwood, Tenn., and Business Holding Corp. Inc. of Baton Rouge, La. — Patterson is an advocate of well-reasoned approaches to mergers where markets are carefully analyzed for their strategic value and impact in relation to broader goals of the franchise.
While Patterson acknowledged that economies of scale are an appropriate matter to consider “as long as they are real,” he said that he is more attuned to an incremental approach to growth versus what he calls “franchise-changing” mergers.
“Growth within itself is no panacea,” Patterson stated.
Adapting to narrower spreads, bankers are faced with the challenge of driving more volume of business through their networks while being as efficient as possible in a manner that doesn’t alienate customers and clients. And while pundits realize the value in building a coherent geographic franchise, there are strategic nuances in the selection of geographic markets. While Wall Street tends to focus its attention on selected, larger urban areas, some organizations, such as BancorpSouth, have found opportunity in targeted suburban markets that possess attractive economies and reinforce the company’s more comprehensive financial services offerings.
For example, the recent Premier Bancorp and Business Holding Corp. acquisitions are located in what Patterson deems as two of the South’s “most dynamic economies” that complement existing operations. The Nashville suburb of Brentwood complements BancorpSouth’s existing banking facility that it opened two years ago in that area. Baton Rouge reinforces the northern Louisiana market, as well as existing insurance activities.
“In Baton Rouge, where we already have the largest insurance agency in Louisiana, BancorpSouth now offers our customers a complete line of banking and other financial services,” Patterson added.
While traditional branches have evolved in and out of favor over the years, depending on efficiency pressures, Patterson once again stressed that there is value when a well-thought-out strategy guides retail distribution. Acknowledging the expense associated with full-service branches, Patterson noted that viable sales training and support are critical factors in distinguishing successful branches.
“All of my information told me that customers value branches and we’re in the business of keeping customers,” Patterson concluded.
Contact MBJ contributing writer Karen Kahler Holliday at email@example.com.
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