Survey: Customer service may help small banks grow

A recent survey commissioned by a New York metropolitan bank indicates that small-business owners can be wooed away from the nation’s largest banks to smaller community-based financial institutions because customer service is expected to be better.
“Many small-business owners and executives are concerned that customer service may suffer, as the largest banks cope with the challenges of a weak economy, tightened credit and industry consolidation,” said Michael Bizenov, executive vice president of Sterling National Bank, which commissioned the survey.
“In this environment, it is understandable that many small-business owners and executives are considering moving their banking relationship to smaller banks, which are better able to keep a consistent focus on service,” Bizenov maintained.
With offices in Manhattan, as well as Nassau, Queens and Westchester counties in New York, Sterling is the principal banking subsidiary of Sterling Bancorp, a company with assets exceeding $2.2 billion, and prides itself on its “professional banking group,” a division devoted to businesses and nonprofits.
Five hundred business customers of the nation’s largest banks (measured by assets) participated in the survey, conducted in March by Opinion Research Corp. Participants included 100 small-business customers, 46 percent of whom are expecting to switch to small or mid-size banks.
Even those businesses surveyed that are currently satisfied with their business banking relationships cited customer service as the primary reason they would consider switching. Thirty-one percent cited a decline in customer service as the main reason they would switch, followed by 21 percent dissatisfied with fees or rates and 13 percent worried about the recession’s impact on their banks’ financial health. “I can honestly say we have seen an increase in small-business customers,” said Frederic P. McDuff, president of Freedom National Bank, based in the Greenville section of Smithfield with an office in Cumberland. Assets were at $84.4 million as of the first quarter. “We do primarily small-business lending, that’s our niche, and since the first of the year, loan requests and other inquiries from small businesses have increased significantly,” he said. Washington Trust Co., whose parent had total assets of $2.95 billion as of March 31, claims a “tremendous increase” in business lending, with most new customers coming from the bigger banks in Rhode Island, according to Elizabeth B. Eckel, senior vice president of marketing.
Over the last 10 fiscal quarters, the bank’s portfolio for commercial lending increased 62 percent, going from $561.3 million to $908.3 million. That is an annualized growth rate of 21 percent, said David V. Devault, executive vice president, chief financial officer and secretary.
Bank of America, however, believes smaller community institutions can’t compete with the amount and quality of products and services it offers, particularly online, said spokeswoman Tara Burke. Bank of America was the largest bank in the U.S. at the end of last year, with nearly $2.5 trillion in assets.
“We have more than 4 million small-business customers,” Burke said, “who enjoy the advantages of more than 18,000 automatic teller machines (ATMs) and 6,000 banking centers nationwide. More than 2 million of those small-business customers do their banking online.” •