JPMorgan loan growth drive leads to BofA territory
CHARLOTTE, North Carolina
CHARLOTTE, North Carolina (Reuters) - JPMorgan Chase & Co (JPM.N) this week added a team of commercial bankers in Charlotte, North Carolina, the hometown of its rival Bank of America Corp (BAC.N), as it seeks growth in territory where it doesn't have branches.
Commercial banking isn't the biggest revenue generator for JPMorgan, but it is an increasingly important source of earnings growth for the largest U.S. bank, as companies expand their borrowing at a rapid clip.
The New York-based bank opened a similar office in Kansas City, Missouri earlier this year, adding to outposts in Tennessee, Minnesota and states along the eastern seaboard. JPMorgan has few other ways to grow now - regulators would not likely approve of its making big acquisitions.
JPMorgan is trying to gain market share in regions such as the Southeast at the expense of competitors, said veteran bank analyst Nancy Bush, a contributing editor at SNL Financial.
"They're saying, 'If we can't buy it, we'll build it,'" Bush said.
JPMorgan is best known for corporate and investment banking operations serving global corporations and consumer banking operations that have the most dominant presence in New York, the Midwest and Texas. But the expansion in Charlotte and other markets is focused on serving medium-sized firms, known as "middle market companies," with annual revenues of between about $10 million and $500 million.
In a February investor presentation, JPMorgan said it was looking to expand middle-market banking in 19 markets, including nine cities inherited in its 2008 Washington Mutual acquisition and 10 in metro areas outside its retail banking territory. Executives said that expansion could bring in an extra $400 million to $500 million in profits over a five- to seven-year period.
That's a relatively small amount for a company that made $19 billion last year. But banks are struggling to increase revenues as new regulations crimp fees and low interest rates make it more difficult to make money from loans. Commercial lending has been a bright spot for banks in recent quarters, but growth could be slowing, according to Federal Reserve data for July.
In Charlotte, JPMorgan began operating with two bankers hired from Bank of America and three from its existing staff.
The bank has targeted the city because it is a hub for North and South Carolina. The area is also home to global companies that could use its services, said Wayne Trotman, president of Chase commercial banking in the Mid-Atlantic, who is based in Philadelphia. Big-name foreign companies with operations in the region include BMW BNWG.DE and Electrolux (ELUXb.ST).
It will be operating in a region overflowing with Bank of America, Wells Fargo & Co (WFC.N) and BB&T Corp branches, but Trotman is not daunted by his bank's lack of branches in the region.
"Because we are talking to sophisticated clients and given the electronic nature of our offerings we do not believe it's mission critical," he said.
JPMorgan expects to hire more in the city over the next two years, he said. In addition to being Bank of America's hometown, the city is a major center for San Francisco-based Wells Fargo, which bought Charlotte-based Wachovia in 2008.
JPMorgan is not alone in planting bankers outside its traditional territory. Midwest regional banks KeyCorp (KEY.N) and U.S. Bancorp (USB.N), for example, have corporate bankers around the country, including Charlotte. Bank of America also has bankers in states where it does not have branches.
A Bank of America spokesman declined to comment on JPMorgan's expansion. In a statement this week, the Charlotte Chamber of Commerce, which has Bank of America executives among its leadership, said it was great news for the Charlotte financial services sector.
The second-largest U.S. bank cut some commercial banking jobs this year, but in an interview this month with Reuters, Bank of America commercial banking head Laura Whitley said the bank plans to hire 50 bankers this year.
(Editing by Leslie Gevirtz)