- The Washington Times - Sunday, February 13, 2005

Banking industry analysts say a turf battle looms after Commerce Bank announced tentative dates last week for opening 10 to 15 branches in Northern Virginia, the District and Maryland this year.

For bank customers, the result could be longer banking hours and more competitive rates on routine services.

In a city with many of the nation’s biggest banks, Commerce Bank is trying to carve out a niche with an operating style similar to that of Wal-Mart or Starbucks.

“It’s a market that has lots of consumers and small businesses,” said Mark Fitzgibbon, director of research for Sandler O’Neill & Partners, a Wall Street financial firm. “It’s a place where a bank like Commerce should be able to take meaningful market share from some of the larger players in the region.”

Commerce Bank calls itself “America’s most convenient bank” because of its seven-day-a-week service, gifts for opening accounts, free checking and free use of coin-counting machines.

“They’re all part of the Commerce tradition,” said David Flaherty, Commerce Bank spokesman. “We’re a retailer. Just like for Starbucks it’s coffee and for Home Depot it’s building supplies, for Commerce Bank it’s financial services.”

Although most banks are urging customers to use automated teller machines instead of branch banks for routine transactions, Commerce Bank is trying to draw more people to its branches, which its management refers to as “stores.”

The branches typically are open 7:30 a.m. to 8 p.m., “and they’re open Saturday and Sunday, which is really unusual for a bank,” Mr. Fitzgibbon said. “Their whole model is driven off of deposits.”

Good service is supposed to get customers to open personal accounts, then move to mortgages and business loans.

“They’ve changed the face of American banking, probably forever,” said Gary Townsend, bank analyst for Arlington investment firm Friedman, Billings, Ramsey Group.

As a result, competing banks will need to extend their hours and offer more services, such as safe-deposit boxes and drive-through service, to hold on to their customers, Mr. Townsend said.

“There is some vulnerability to some old-line banks here with a company like Commerce Bank coming into the market,” Mr. Townsend said. “They’ve succeeded in a lot of other places. I expect them to succeed here.”

Commerce Bank has more than doubled its network of branches since the late 1990s, growing from 97 in 1998 to 319 by the end of 2004.

The Cherry Hill, N.J.-based bank has more than $30 billion in assets. Founded in 1973, it operates in New York, Pennsylvania, New Jersey and Delaware with about 11,000 employees.

The first branches planned for the Washington area are scheduled to open in the spring in Georgetown and Dupont Circle in the District, in Centreville and Alexandria in Virginia and Germantown in Maryland.

Commerce Bank plans eventually to open 200 branches in the Washington area. About 20 full- and part-time employees staff each branch.

Meanwhile, big banks already in the Washington area say they will meet any challenges to their business.

“We are very determined to remain a market leader and certainly willing to compete on any basis necessary,” said Barry Koling, spokesman for SunTrust Bank, which operates 171 branches in the Washington area.

Industrywide, deposits grew by about 4 percent last year, the Federal Deposit Insurance Corp. reported. Commerce Bank’s deposits grew 34 percent last year while earnings per share rose 26 percent.

Commerce Bank’s stock closed at $57.12 per share Friday on the New York Stock Exchange, down 52 cents, or 0.9 percent. The stock value has more than quadrupled in the past five years.


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