At long last, US regional banks are no longer party to a feeding frenzy.
After a difficult year marked by new regulatory demands to raise capital, US regional banks have returned to what they do best: focusing on corporate clients in industries that are concentrated in their regions, such as logistics in the Southeast and petroleum in the Southwest.
“The cyclicity of our industry and those we do business with is the very reason for our diversified business model,” says Mike Hagedorn, president and CEO of UMB Bank of Kansas City, Missouri, our pick this year for best midmarket provider in the US Midwest. “We continue to diversify our businesses and products to further drive growth despite cyclicity.”
US regional banks have maintained a high degree of “touch” with corporate clients by assigning a single relationship manager to each company. This minor detail serves to distinguish regional banks from national leaders like Bank of America or Citi, which typically assign each corporate client a separate relationship manager for each service, from trade finance to treasury management. Smaller companies typically employ too few in the finance department to support such a division of labor.
Through acquisition, many of these banks have grown a diverse array of business lines. Based in Pittsburgh, Pennsylvania, PNC, the best in the Mid-Atlantic this year, stands out as the shareholder of more than 20% of BlackRock, which, with $5.1 trillion in assets under management, is the world’s largest money management firm. Others are growing so large and diverse through acquisition that they are vertically integrated with the capital market services that they now provide, from equity and debt capital markets to M&A advisory.
A case in point is SunTrust Bank, which Mark Chancy, wholesale banking executive at the bank, describes as a “completely integrated wholesale ecosystem.” Headquartered in Atlanta, Georgia, where it has traditionally served the agriculture and logistics industries, SunTrust is ramping up its capacity to raise funds for biotechnology companies by hiring professionals in equity research, equity origination, M&A advisory and investment banking. In December, the bank expanded into real estate finance by acquiring Pillar Financial, a lender with Fannie Mae, Freddie Mac and FHA licenses.
“We are connecting commercial clients,” says Chancy. “We are trying to help them fund their strategy and potentially partner with other companies—through acquisitions, equity structure and debt—and to provide the liquidity and cash management solutions they need.”
Our winner in the Southwest region, San Antonio, Texas-based Cullen/Frost Bankers is respected for its expertise in raising capital in technology and oil and gas sectors, as well as financing trade and investment with Mexico. This year’s West regional winner, Silicon Valley Bank of Santa Clara, California, is known for financing wine-related industries and the technology sector, and for facilitating private equity deals. It has a branch in London and a joint venture with Shanghai Pudong Development Bank in China, both of which it uses to source private equity investment.
To hear some analysts tell it, many regional banks are merely taking a breather from a shopping spree. “This is an industry that’s in consolidation,” says Chris McGratty, director of equity research at Keefe, Bruyette & Woods in New York. “Once you have acquired a bank, you’re more likely than not to acquire another one.”
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Best US Regional |
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Mid-Atlantic |
PNC |
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Midwest |
UMB |
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West |
Silicon Valley Bank |
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Southwest |
Cullen/Frost Bankers |
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Southeast |
SunTrust Bank |
