Out-of-state banks from Massachusetts and New York are making big moves in Connecticut that will reshape the competitive landscape, and they’re using different strategies to grow their local footprints.
Upstate New York’s M&T Bank, with $142.2 billion in assets, is making the biggest splash with its $7.6 billion planned acquisition of Bridgeport-based People’s United Bank, a deal that when completed will give it 183 branches and $27.8 billion in deposits in Connecticut alone. (Currently M&T has just nine branches in the state.)
On the other hand, M&T’s neighbor in Norwich, N.Y., NBT Bank, is pursuing a de novo strategy in Connecticut, dipping its toe in the waters with new branches in Glastonbury and potentially West Hartford.
Finally, Massachusetts-based PeoplesBank is taking a hybrid approach. After entering the Connecticut market in late 2018 with its $60 million purchase of the First National Bank of Suffield, it’s now asking regulators to approve its first de novo branch in posh West Hartford Center, at 102 LaSalle road — the former location of a United Bank branch.
The three banks range widely in size, but share at least one thing in common: They see opportunity in the state’s increasingly consolidated banking landscape.
Opportunity knocks
PeoplesBank CEO Thomas Senecal said he’s been pleased with his bank’s Connecticut business and now hopes to open three or four new branches here in the next few years, all clustered in the northern half of Hartford County, with the aim of further growing his $3.3 billion institution’s commercial loan portfolio and retail deposits.
“Connecticut is very similar to our other markets, we’ve had some great success there,” Senecal said. “Overall I’m really happy with the results.”
At NBT, the Glastonbury and West Hartford offices would be the first brick-and-mortar footholds for the bank since it launched a commercial lending business here more than a year ago.
“The pipeline has been very, very strong,” NBT’s Connecticut Regional President Andreas Kapetanopoulos said of his bank’s local loan experience thus far. “Despite COVID, we’re seeing a lot of activity.”
For M&T, its pending acquisition will give it a dominant Connecticut market share and a deeper Northeast footprint.
People’s United has the second-largest deposit market share in Connecticut, behind only Bank of America.
“The merger will produce a bank with a leadership position in small and mid-sized markets throughout the Northeast, complemented by a strong presence in four of the 20 largest [metro areas] in the country, ranging from Washington, D.C. to Boston,” said M&T’s CFO Darren King during a recent investor call.
However, Connecticut’s wealth is clearly also part of the allure, and M&T is hoping to cross-sell services from its wealth management arm, Wilmington Trust.
“Many of the People’s United markets that are new to M&T offer access to an affluent customer base, where leading wealth management capabilities can be leveraged through Wilmington Trust,” King said.
Contrasting strategies
NBT’s foray out of its home state and into New England over the past 12 years has been somewhat unique in that its leaned more heavily on the more organic — and often slower — strategy of opening de novo branches, rather than acquiring an existing bank in those states.
It’s not that NBT hasn’t done acquisitions, but its market entries into Vermont, New Hampshire and now Connecticut — where it perceives opportunities for middle-market and small-market lending in a rapidly changing banking landscape — have been from the de novo playbook.
The strategy typically involves hiring commercial lenders in a new market ahead of establishing any full-service branches, and it contrasts with PeoplesBank’s acquisition approach.
Kapetanopoulos said NBT sees plenty of opportunity in Connecticut, but that management also wants to be deliberate about its new investment.
“We want to make sure we grow wisely,” Kapetanopoulos said. “The formula for what we’re doing, there’s nothing magical about it, it’s pretty straight forward as long as you stick to the plan. And then you have to deliver.”
PeoplesBank, which like NBT had commercial customers in Connecticut before pursuing a brick-and-mortar footprint here, initially opted to acquire branches rather than build up its own.
“There are obviously different strategies you can take,” said Senecal. “To buy something, it gives you an immediate impact and presence that you can’t get from an organic method.”
However, as PeoplesBank seeks to grow further south of the Massachusetts border, it’s pivoting to the de novo strategy. One reason is that market conditions have changed. It’s tougher today to find the right acquisition target at the right price than it was a few years back.
“The competition for acquisition is intense, and it’s expensive, so a deal has to work both economically and geographically,” Senecal said.
NBT has built a nine-person Connecticut team so far, and Kapetanopoulos said the bank will keep a heavy focus on commercial lending, even as it prepares to offer its first retail accounts here.
Retail deposits aren’t exactly as in demand as they were a few years ago. Interest rates are sitting at record lows, and many banks are flush with inflated deposits due to federal COVID-19 stimulus and pandemic-related changes in consumer spending habits.
Even in that environment, Senecal said banks must chase after new deposits and plan for the long term.
“Unfortunately we have all this cash and we have no good place to put it,” Senecal said. “We still have to go after other deposits. The [stimulus balances] are going to get spent some day when the economy picks up, and as a bank we are always going to need deposits and loans.”