New Thrust at SunTrust

New Thrust at SunTrust

By Francis X. Gilpin

Associate Editor

SunTrust Banks Inc. bankers stay on message.

Interviewed six months and 50 miles apart, the Atlanta-based bank's regional chief executives in Sarasota and Tampa both managed to point out that 80% of SunTrust's new customers come in through branch offices.

That's probably not a coincidence.

Margaret L. Callihan and Daniel W. Mahurin are loath to admit it. But these chair-president-CEOs of SunTrust's Southwest Florida and Tampa regions, respectively, cannot alter reality: Their bank has been losing deposit share in Florida in the past three years.

From a 2002 peak after acquiring Huntington National Bank's branches in Florida, SunTrust has seen its share of Florida deposits shrink from 11.8% to 10.2% in 2004. Federal Deposit Insurance Corp. figures show similar declines in all five Gulf Coast markets, including Sarasota and Tampa.

Callihan and Mahurin downplay the FDIC data.

"It's a picture taken on a day," says Callihan, referring to the annual FDIC reports. "You get statistics that may not make sense."

Says Mahurin: "We've almost stopped looking at deposit share. Different banks put their deposits in different places, depending on their structure. So it's like apples and bowling balls."

The two bankers are certainly loyal to SunTrust, having spent their entire 25-year-plus careers with the bank or one of the institutions it acquired. But what is indisputable is that SunTrust, the product of a 20-year-old merger between a Georgia trust company and a Florida bank, has made a renewed commitment to consumer banking.

It's about time, according to bank analyst Richard X. Bove.

Bank of America Corp. and Wachovia, two rivals for Florida business, changed their direction at least two years before SunTrust, says Bove, who works for Punk Ziegel & Co., which seeks investment banking business from SunTrust. "They had been following policies that were aimed at increasing customer profitability rather than increasing customers," Bove wrote last November. He says SunTrust alienated customers by raising prices and shifting around relationship bankers.

Executives at SunTrust were livid at Bove's commentary, who has since spoken more approvingly of the bank (See accompanying story). Even so, SunTrust has mimicked the changes undertaken earlier by Bank of America and Wachovia, such as longer office hours and other conveniences.

Wal-Mart store link

One step toward more aggressive consumer banking was SunTrust setting up shop in Wal-Mart Stores Inc.'s giant warehouse stores along the Gulf Coast.

Callihan says SunTrust gained entry to Wal-Mart's huge customer base via the bank's 2004 purchase of Memphis-based National Commerce Financial Corp., which already had been invited into the stores.

By the end of this year, Callihan says, SunTrust will be in eight Wal-Marts within her Southwest Florida region, which stretches south from Manatee to Collier counties.

Mahurin says in his Tampa region, from Hillsborough north to Sumter counties, SunTrust is now in five Wal-Marts and will be in five more by the first quarter of next year.

About 35,000 shoppers visit the average Wal-Mart Supercenter every week, according to Mahurin. SunTrust customer service representatives are allowed to roam the store aisles, with some restrictions, to interest shoppers in bank products.

But SunTrust isn't just pairing up with the world's largest retailer to expand its retail banking. Mahurin has five new branches planned to serve the biggest growth areas in his Tampa region: south Hillsborough, Pasco and Hernando counties.

SunTrust is updating the look and feel of its branches, too.

Over lunch at Tampa's University Club, Mahurin offers to drive a Review reporter across the bay to show off one of the newest SunTrust offices in St. Petersburg.

At the Carillon office, the lobby is uncluttered and inviting. The desktops are rounded. No square edges for these new-age bankers. Television screens abound with promotional messages.

Adding to the high-tech aura, customer service staffer Amanda Bostrom escorted us beyond the tellers' cages to demonstrate a new self-service room for deposit box holders. A digital hand scanner regulates entry to the room.

It's not a radical overhaul for the traditional bank branch. Some new offices of Washington Mutual, a Seattle thrift expanding in Florida, have the decor of a singles bar. Still, the change is a bit startling for what some consider a hidebound Southern bank.

Next door in Carillon is a new AmSouth Bank office. Mahruin urges the reporter to check out the competition while he waits outside in his SUV. Sure enough, the AmSouth lobby appears crowded and harder to navigate. There seem to be desks and cubicles everywhere, in contrast to the upscale lobby at SunTrust.

Midtown branch

The new SunTrust branch that should get the most attention is going into St. Petersburg's Midtown neighborhood.

Mayor Rick Baker desperately wanted a bank to come into the long-neglected, predominantly African-American section of his city. But only one bank submitted a proposal to St. Petersburg officials.

"So many people are appreciative that we stepped up," says Mahurin. "I think they're going to remember that, and they're going to bring their business to us."

The Harbour Island resident has made a commitment to Tampa as well. In 1999, Mahurin persuaded then-Tampa Mayor Dick Greco to put him on the Tampa Housing Authority to lead an agency cleanup following a corruption scandal. He'd served on the housing authority in Orlando, where he grew up and previously worked for SunTrust.

The departing Tampa Housing Authority members had backed their executive director right up until almost the moment that federal agents arrested him. "They were overdrawn on their goodwill in the community," the banker politely recalls of his predecessors on the authority.

Mahurin, who chaired the Tampa authority three years, helped restore credibility with redevelopment projects in neighborhoods such as College Hill. More recently, Greco successor Pam Iorio tapped Mahurin to lead her ambitious downtown Riverwalk project along the Hillsborough River and port channels.

Callihan is a recent transplant from Tennessee who is getting familiar with Sarasota. What were her first impressions of the Sarasota area?

"Real estate is a much bigger business in a region like Southwest Florida than it was up in the areas I'd worked in before," says Callhian.

Her new territory is also different, even from Mahurin's, because of the need for most banks the size of SunTrust to compete aggressively with securities brokerages to manage the assets of wealthy retirees along the Gulf Coast.

There are lots of signs for banks and investment firms all along thoroughfares such as Main Street in Sarasota or Tamiami Trail North in Naples.

"You would expect that with the demographics we have," says Callihan, who offers affluent customers an array of services, including SunTrust's capital markets group for businesses needing to raise expansion funds.

SunTrust is not just a retail bank, despite the recent emphasis on that segment. "We have specialized services for every point on the spectrum," she says.

Margaret

L. Callihan

Title: Chairwoman, president and CEO for SunTrust Bank, Southwest Florida.

Age: 50

Higher education: Vanderbilt University, Nashville, Tenn.; business degree.

Where was she before now? Born in New York and raised in Texas, she did public relations for a country music foundation for a year after college. She joined Third National Bank of Tennessee, which SunTrust later bought, and climbed the ladder to top jobs in Nashville and Chattanooga.

Hobbies: Snow skiing, walking and reading. "I read every John Grisham [novel] the instant they come out."

Daniel W. Mahurin

Title: Chairman, president and CEO for SunTrust Bank, Tampa.

Age: 56

Higher education: University of Central Florida, Orlando; communications degree.

Where was he before now? The Indiana native grew up in Orlando and worked part-time in banking while in college. After a tour in the U.S. Marine Corps, he came back to what became SunBanks Inc., an Orlando bank that merged with the Trust Co. of Georgia in 1985 to form SunTrust.

Recent personal dilemma: This baby-boomer had a choice: Attend a Paul McCartney concert or watch his alma mater play football in Tampa against the University of South Florida. He ended up joining his daughters in Gainesville to watch their University of Florida team.

Hurricane Forecast Colors SunTrust Outlook

Richard X. Bove has been critical of SunTrust Banks Inc.'s performance at times over the past year. Lately, though, the Pinellas Park-based follower of bank stocks has mellowed some.

Here's a sample of his comments:

Oct. 11, 2004: Bove initiates coverage of the stock with a "market perform" rating, citing an investigation by federal securities regulators into the bank's accounting for reserves.

Nov. 1, 2004: While mentioning SunTrust's declining deposit share in Florida, Bove also cautions investors about the departure of top executives in the state.

Nov. 12, 2004: After third-quarter earnings disappoint, Bove writes: "It is our impression that when most banks decided to develop and put in place a more consumer-friendly approach to retail banking, including longer hours, more service in the branch, better pricing, and more innovative packaging, SunTrust was moving in the opposite direction."

Dec. 10, 2004: Following a speech by SunTrust CEO L. Phillip Humann, Bove says: "It appears that Mr. Humann is intent on improving the performance of the institution and feels he needs new or younger blood to do so. This may be the case because SunTrust appears to be losing market share in many of its Florida markets."

Jan. 21, 2005: Bove laments that the bank's tangible book value has dropped 24% since the acquisition of National Commerce Financial Corp.

March 5, 2005: Bove raises his earnings estimate for this year and next. Among the reasons, he writes: "We do not believe that mortgage activity fell off in Florida as dramatically as we estimated earlier."

July 12, 2005: Bove upgrades SunTrust's stock rating to "buy." One of his reasons is the increasing likelihood of powerful hurricanes decimating Georgia and Florida. "Hurricanes have the unintended consequences of converting fixed property into cash. The intermediary is the insurance company. The beneficiary is the bank," he writes. "As a home owner and resident of Florida, this is not appealing to me. It will be for the state's banking industry."

Source: Punk Ziegel & Co.