ABA Banking Journal - August 2007 - (Page 8)

briefing “The first-ever talk show about banking” WAMU TV Ad Campaign: One banker rearranging his toupee the Pen campaign and WAMU Free Checking began, it has added a record 1.23 million net new checking accounts and, according to a JD Power & Associates study, is the first bank consumers think of switching to. bankers as he continued, “Let’s go to WAMU, they’re making fun of bankers. With us it’s the same concept, we’re trying to be—not trying, we are—new.” WAMU skewers what it calls “traditional bankers” in its acclaimed TV ad series ‘Chattin’ with the Pen,’ a spoof that’s reportedly “The first ever talk show about banking.” The elderly white men, corralled in the pen, poorly field questions—all posed by women and minorities in a Jerry Springeresque event presided over by a young, good-looking, denim-clad black WAMU banker. Will the real bankers please step forward? WAMU was asked if any of its peers reasonably protested: “But you’re bankers, too!” and didn’t the distancing moves of WAMU and others from the stereotypical banker smack almost of an industry identity crisis? And further, what is it about banks that make them inherently unlikely to provoke ‘a warm and fuzzy’ feeling among consumers? Witness, by contrast, the real affection consumers feel for favorite retailers, be it Starbucks or Bed, Bath & Beyond. Has the new wave of unconventional banks engendered such feelings? WAMU declined to discuss these matters in an interview. In a statement, it noted, that since last year, when its Chattin’ with Shock value works Shock value draws customers into the branch—at least in New York—both HSBC and NorthFork Bank say. An elderly woman who came into NorthFork’s new branch on 2nd Ave and 10th St., in Manhattan’s edgy East Village, to complain about the apparent graffiti on its walls, wound up opening an account, says branch manager Michael Narciso (see photo on page 10). Although the interior is graffiti-styled, Narciso says it’s not condoning graffiti. The sanctioned illustrations depict neighborhood scenes by local artists. “This is a way of saying it isn’t right that banks should be cold and sterile,” he says. HSBC’s eco-friendly marketing campaign makes frequent use of the word ‘karma.’ The incongruity of using the religious concept of reward for living a good life, with, by contrast, Biblical connotations of usury that tarnish ‘banking’ takes people by surprise. “They stop and go, “Oh?!” says HSBC spokeswoman Linda Recupero. “It has drawn people into the bank.” Snapshot Do share repurchases signal more M&A activity? S hare repurchases has been a classic tool used by banks to return excess capital to shareholders. The recent uptick in repurchase activity in the bank and thrift space could be a signal that banks are viewing their stock as being relatively undervalued. Or it could be a side effect of a frothy credit market, as some analysts have described it, where, instead of Correlation of share repurchases and M&A activity among banks and thrifts deploying capital as loans in a market that might take a Aggregate announced deal value Aggregate common shares repurchased negative turn, banks are returning it to shareholders. 40,000 There have been signals of potential issues in the quality of loans. So the idea that banks are being con30,000 servative with their capital is not that far fetched. Returning capital through share repurchases also has 20,000 the side benefit of supporting stock prices in an uncertain market. 10,000 Putting that aside, an interesting correlation can be drawn between repurchases and another phenomenon 0 Q2’01 Q4’01 Q2’02 Q4’02 Q2’03 Q4’03 Q2’04 Q4’04 Q2’05 Q4’05 Q2’06 Q4’06 that ties into the relative valuation of bank stocks— Excludes the following megadeals: Bank of America/FleetBlost for $49.3B in Q4’03, JP Morgan Chase/Bank One for $58.88 in Q1’04, merger and acquisition activity. As can been seen in the Wachovia/Golden West Financial for $25.58 in Q2’06, and Bank of New York/Mellon Financial for $16.88 in Q4’06. Source: SNL Financial chart, there is a reasonable connection between the dolValue ($millions) lar value of share repurchases and the aggregate dollar value of acquisitions in the banking space over the last few years; with up-ticks in both generally aligning themselves. Testing the connection, there were 54 deals announced in the second quarter of 2007, down from 86 in both the prior and the year-ago quarters. Given the relative down-tick in M&A activity, it remains to be seen if the uptick in share repurchases will in turn fuel an uptick in deal making, or be a symptom of a troubled market. —John McCune, SNL Financial jmccune@snl.com 8 AUGUST 2007/ABA BANKING JOURNAL www.ababj.com/subscribe.html http://www.snl.com http://www.ababj.com/subscribe.html

Table of Contents Feed for the Digital Edition of ABA Banking Journal - August 2007

Contents Editor's Column The Unbankers Snapshot: Do Share Repurchases Signal More M&A Activity Sleight of Mind Goals Behind Proposed ABA/ACB Merger ABA Resources ABA Chairman's Position Should You Sell Those Nonperformers Pass the Aspirin Branch Design - Evoking a Sense of Place Two Banks Take the LEED Move Over, Buddy Service Feature: Bankers' Banks Directory Websites: What's State of the Art for Banks? Citi Mobile to Go Strong with iPhone? Date First, Marry Later Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - August 2007

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