Bank New England
Name: John P. Hamill
Position: Chairman and CEO of Sovereign Bank New England
Age: 61
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
Learn More
Background: Prior to joining Sovereign, Hamill was president of Fleet National Bank, Massachusetts, for eight years. He had also served as president of Shawmut Bank for more than 12 years, and before that was president and CEO of Banc One Company. Hamill started his banking career in 1965 as deputy general counsel at Chemical Bank in New York.
Education: Bachelor’s degree from College of the Holy Cross, Doctor of
Laws and Master of Laws in taxation from New York University.
Residence: Boston
Sovereign Bank New England is a division of Sovereign Bank, a subsidiary of Philadelphia-based Sovereign Bancorp, Inc. Sovereign Bank New England has 285 community banking offices throughout the New England area, including 30 branches in Rhode Island. It has $1.9 billion in total deposits in Rhode Island, where the company has 768 employees.
PBN: I’ve heard people refer to the "new Sovereign" – how does the new compare to the old?
HAMILL: If you look back five or six years ago, Sovereign was $10 billion in size and now it is $35 billion in size. It was much more of a thrift, most of its balance sheet consisted of mortgages and investments. Today, its balance sheet is a commercial bank balance sheet. It has a higher percentage of commercial loans than most of the other commercial banks that we compare ourselves to. While it is still very important for us to do business with our home equity loans and our consumer finance/auto lending programs, we have also become a major commercial lender.
Also, if you look back five or six years ago, we have more than doubled in size. We now have 550 offices in Sovereign, (while) five years ago we probably had one-third of that number. So the transformation has been substantial. In terms of earnings, when you look back five years ago the earnings are substantially higher by about a factor of four.
Obviously, you know the New England market based on your experience at Fleet and Shawmut. What did you think when you heard about this relatively small Pennsylvania bank trying to break into the market?
I didn’t know Sovereign Bank at all. I did know Joe Campanelli (Sovereign New England’s president and COO of commercial and business banking) from his days at Shawmut Bank. After talking to him and meeting with Jay Sidhu (the head of Sovereign Bank), I got a sense of the vision for the company and what the goals were. I was very intrigued with the notion of here is a company that is trying to double its size, and provide commercial banking and consumer banking services in a brand new market.
What was the key to moving into this territory?
I think it helped a lot to have the team that was coming over from Fleet and BankBoston on the ground. The team members in all the branches know the customers, so they were the anchor for us. Then we had the commercial loan officers who came with the loans we got from Fleet and BankBoston. They knew the customers. The management team that was assembled also knew the markets.
Do you think there is any difference in the financial services environment when you compare New England to other areas, like Pennsylvania?
I don’t think so. I think there has been such consolidation over the last 20 years that there is a common theme in the banking and financial services industry of consolidation. You used to have many good-size banks; now you don’t. For instance, in Massachusetts there are 240 commercial banks and savings banks – 75 percent of those are under $250 million in size. So you have a lot of really smaller banks, but only a handful over a billion dollars in size. That’s true in most states.
The bank had the benefit of taking over branches with existing customers. Can you give me an example of how Sovereign built on that?
Prior to these branches becoming part of Sovereign, the branches were opening new accounts on average in Rhode Island of about 1,000 a week. We are now opening about 2,500 a week in our Rhode Island branches, so we almost tripled the new account openings in the same branches that used to be run by Fleet. We are building on it. That is because we are doing a lot of advertising, but on a direct-mail basis. Rather than try to advertise to everybody, you should be marketing to areas you know where you are located.
Initially, Sovereign stock took a major hit with the acquisition of the new branches. That has changed. Now, the stock is up and you’re getting a lot of endorsements from analysts.
We are delighted. Over the last two years, the stock has more than doubled. So what has happened is the financial analysts have said, ‘Well, here’s a company that has done what it promised.’ We said we could do the integration without losing deposits. Due to the enormous work of everybody in the company we were able to retain virtually 100 percent of the deposits. We said we would do the integration in a way that would create an integrated company, so that we could use our systems throughout the company. We have done that. We have not had to run separate systems here in New England and separate systems in Pennsylvania. We have done that efficiently. We also said we would go out there and do the new business that I just talked about. And we said that we would pay off part of the purchase price that we owed to Fleet over an 18-month period – we did it early. We said we would build our capital in the meantime, so that our capital would get to levels where our tier one capital would be over five percent. By the end of this year, it’s clear that we will be there.
You add all of that up…and many analysts have now recommended us. We still think our stock has a lot of value in it to go. We have set a target that our earnings per share by 2005 will be $2, and we think that is a very achievable goal.
What is the biggest mistake Sovereign could make?
Certainly, the No. 1 issue people look at right now is the credit quality of the organizations. If we were to get too aggressive in our lending and were to try and overreach, that would be a problem. Having said that, we have come through a very difficult economic time over the last year and a quarter and our profile from a credit-quality standpoint has been good. We have been able to get through this recession. With our customers who have had troubles, we have taken those charge-offs that we needed to take and kept our provisions for loan losses and reserves high. The biggest mistake would be if we were not careful in the way we lend to our customers.
Sovereign made some good gains in commercial lending last year. How do you go about keeping it up?
They’re coming to us. The gains we made last year were at the expense of the competitors, so we’ve shown that it can be done. Partially, it’s making sure that we are focused in terms of our calling efforts. We have faster response times – you don’t have to go through layers and layers of approval processes. We have people in Rhode Island who are able to make the loan decisions for 99 percent of the loans made in Rhode Island. They don’t come to Boston for approval for 99 percent of the loans. Also, I think we are a little more customer-friendly. Also, we have the relationship managers in Rhode Island who know the customers and know the marketplace. We like to say that we are big enough to ‘out-national’ the locals, and small enough to ‘out-local’ the nationals.
Do you see any possible acquisitions coming in the next year or so?
We made an acquisition of a $1.4-billion bank in Pennsylvania called Main Street Bank, which we just closed last week. We are looking to do that in New England in order to enhance our current franchise.
What surprised you the most about the survey results coming out of the economic outlook document recently published by Sovereign Bank?
The most surprising thing is the confidence level in that survey was fairly low. However, at the same time, the consumers were in fact buying cars and homes at record rates. That has reflected itself in Sovereign’s business. We have had record months in auto finance and our home mortgage business. There’s some uncertainties out there (linked) to the issues surrounding Sept. 11, the issues surrounding Enron and other kinds of high-profile issues. There’s schizophrenia going on in the marketplace between how we say we feel about things and what we are actually doing. In terms of the economic survey, Rhode Island was doing somewhat better than Boston and the national economy. The Rhode Island economy hasn’t been as heavily involved with the technology and dot-com sector, so it didn’t have the problems that other parts of the country had.
How is the private bank you are developing coming along?
We just got it started in New England. We have hired people from Boston, Rhode Island and Hartford to add to our people in Pennsylvania. We are looking to make an acquisition of a money management firm to add to that bundle of services. We are very interested in providing customized service to those individuals who have the needs of trusts and estate planning and money management. So we have a trust and wealth management group that will help people with those needs.
