While People’s United Bank is doubling down on its investment in grocery-store branches with its recent Citizens Bank acquisition, the Bridgeport lender’s Connecticut competitors aren’t following it down the shopping aisle.
Of the 105 Connecticut bank branches in supermarkets, 84 percent are run by People’s United, according to SNL Financial and Peak Performance Consulting Group.
Its closest competitors in the grocery store market are Citizens and Savings Institute Bank & Trust Co., which each have only three in-store branches.
Rockville Financial had three in-store branches before recently announcing the closure of its Big Y branch in East Windsor, SNL data shows.
People’s dominates the in-store segment of Connecticut’s banking industry, and sees it as a growth engine, even though other lenders have been paring down their grocery store holdings in recent years.
“We have an excellent record for in-store banking,” said Valerie Carlson, a spokeswoman for People’s Bank. “We think its sets us apart from the competition.”
One reason People’s enjoys an in-store branch edge is the exclusive branching rights it has with supermarket chain Stop & Shop. Their licensing agreement, which started in 1995, is in place until 2022, keeping People’s competitors out of one of the largest grocery chains in Connecticut for the foreseeable future.
At the end of 2011, 23 percent of People’s branches were in Stop & Shops, regulatory filings show, with deposits totaling $2.5 billion.
The bank’s deposits in supermarket branches open for more than one year averaged $30 million per store, regulatory filings show.
Now, People’s is looking to expand its in-store presence in Long Island and Westchester County after paying $3.25 million to acquire 56 New York branches from Citizen’s Financial Group. All but four of the branches, which have a total of $325 million in deposits, are located in Stop & Shops.
David Kerstein, president of Texas-based Peak Performance Consulting Group, which specializes in banking strategy, said lenders have varied their strategy in pursuing in-store branches.
Some banks, most notably People’s United, have been aggressive in that space seeing it as an opportunity to open less expensive store fronts that generate significant foot traffic from supermarket shoppers and proved more convenient hours for customers.
Carlson said People’s Bank in-store branches are open later than a traditional branch and are available to customers seven days a week. They also offer a full line of services, including checking and savings account access, and loan opportunities including home equity, mortgage, and small business loans.
In recent years, as the banking industry faced significant headwinds, in-store bank branches have been on the decline.
From June 30, 2009 to February 2011, 2.2 percent or 468 in-store branches were closed in the U.S., according to SNL Financial. There are 6,051 in-store branches left.
Bank of America and Wells Fargo are among the banks that closed a significant number of their in-store branches.
Kerstein said in-store branches typically don’t work as well for banks that have more of a small business lending focus or banks that already have a robust distribution network because it can create too much overlap.
Because in-store branches are open longer hours, have smaller staff and are located within another store, they also require different management, which may not fit with some banks, Kerstein said.
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CT 2011 bank earnings soar
Connecticut’s 53 federally insured banks continued to see positive earnings growth in 2011, as industry profits grew nearly 70 percent from a year ago.
Their combined net income rose to $496 million for the year, up from $292 million in 2010, according to Federal Deposit Insurance Corp. data.
A key factor in the earnings growth has been a reduction in problem loans banks are carrying on their books, which allows lenders to reduce reserves, or the provision for loan losses, they set aside to cover loans that may go bad in the future. Connecticut bank’s had a combined loan loss provision of $231 million at the end of 2011, compared to $332 million a year earlier.
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Creative marketing for deposits
A new online marketing promotion by Union Savings Bank helped the Danbury lender add 1,200 new checking account customers, or $6.5 million in deposits, over a three month period.
The marketing campaign centered on the bank’s 1-2-3 Checking product line. The bank, with the help of communications firm The Pita Group, created 1-2-3 Checking Challenge, an online game that awarded prizes redeemable when a player opened a new 1-2-3 Checking account.
From October to December more than 2,200 players spent an average of 5.5 minutes each playing the game, increasing the average time spent on the bank’s website by 400 percent.
The game challenged visitors to arrange rows of numbered circles so that the rows read 1, 2, 3 in sequential order. If players lined up a minimum of three rows in a minute, they won up to a $100 voucher that could be deposited into a new 1-2-3 Checking account.
Greg Bordonaro writes the Financial Sense column every other week. Reach him at gbordonaro@HartfordBusiness.com.
