San Antonio Express-News (Sunday)
Building out a ‘national Main Street bank’
About a decade ago, PNC, the national bank headquartered in Pittsburgh, announced its goal of expanding into the 30 largest metro areas in the U.S.
At the time, it had no presence in San Antonio. That changed last year with its acquisition of the American banking business of BBVA, a Spanish multinational bank, which gave it a foothold in major cities across Texas and other parts of the Sun Belt.
Chris Sherman, a regional president with PNC and its head of corporate banking in San Antonio, helped oversee transfer of the Alamo City’s BBVA branches to the PNC brand. Notably, his bank’s logo has replaced that of BBVA atop the Weston Centre, one of downtown’s tallest skyscrapers, where the bank has its local offices.
After moving to San Antonio in 2014 while working for BB&T (now Truist), Sherman worked several years for Wells Fargo before joining PNC not long before it acquired BBVA.
“So I was actually PNC employee No. 1 on the ground here,” he said. “Things got really exciting really fast. You know, PNC announced the acquisition of BBVA, then we were kind of off to the races, if you will.”
PNC now has 21 branches in San Antonio with about $1.9 billion in deposits, he said.
Sherman — who was born in Massachusetts and spent much of his childhood in North Carolina — recently sat for an interview to discuss the acquisition, the trend of consolidation in the banking industry and the era of low interest rates. The following has been edited and condensed.
Q: Did PNC hire you to help with the transition with the acquisition of BBVA?
A: No, but that’s the job I quickly pivoted to. You know, PNC had set a strategy about 10 years ago of expanding into the top 30
MSAs (metro areas) in the country. It was really doing so, kind of two to three a year, opening a corporate and middle-market banking office in any of those markets, building out a presence then coming behind that with
retail, commercial banking, private banking and the rest of our services. So PNC had announced that they were going to do that in Austin and San Antonio. And I was hired as part of that.
Q: What do you mean by “middle-market”?
A: The way that we segment customers at PNC, middle-market would be companies between $50 million and a billion dollars in revenue. Corporate would be a billion-plus in revenue.
Q: I read somewhere that the bank is in the 29 largest U.S. metro areas right now.
A: We just got to 30! Opened in Las Vegas. With the BBVA acquisition, that put us in 29 of the 30. Then a couple months back, we opened a Las Vegas office to hit 30.
Q: Was the acquisition of BBVA driven by PNC’s desire to expand in this region?
A: Yeah. If you think about that strategy that I just laid out with the MSA expansion, and if you think of PNC’s legacy footprint, BBVA had a very complementary Sun Belt franchise, very heavy presence in Texas, which obviously has several of the largest MSAs in the country, and then kind of out west. So it was very complementary from a footprint standpoint.
Q: So you’ve finished replacing the BBVA brand on branches in San Antonio with PNC. Are you looking to open new locations?
A: Yes. Right now we have 21 locations. We’re constantly evaluating that retail strategy. If you look at where our locations are, we strive to have branches that would be within kind of 10 minutes of each other. Going back to some consumer research on the retail side, customers generally want to be about nine minutes from a branch location. We have pretty good coverage here, but we
constantly evaluate it, certainly as San Antonio continues to grow.
Q: What is the bank’s longterm strategy in San Antonio? A: PNC, in any of the markets that we go into, wants to support the community. And we do that through what we call our “Main Street model.” We consider ourselves a national Main Street bank. And what that looks like — because it’s little bit of an ambiguous terminology — we think of ourselves as an extension of the community in that we have the product services and capabilities of a large national franchise but we have our regional president model, where we deliver those products, services and capabilities in a manner that is very localized. That’s kind of what Main Street means to us. It means partnering with civic organizations or not-forprofits that are important to San Antonio, like the San Antonio Zoo. We just signed on for sponsoring local days here.
Q: When a consumer is looking to open a bank account, how do they decide to choose one bank over another?
A: It’s a lot of work to move a bank account — you have a bunch of drafts coming out of it and all that bill pay setup. The last thing you want to do is, “Hey, I want to disrupt all that stuff,” right? What I would say is it tends to be event-driven for a consumer. That event can be different things. It may be, “Hey, I need a mortgage loan right now because I’m buying a house. You know, PNC has the best mortgage. I’m going to go there.”
Q: I read somewhere that 20 years ago, PNC was considered a ripe target for an acquisition. Could you give me a sense of the bank’s history over the past couple decades? A: There was definitely a time when PNC would have been a target for acquisition. The bank’s grown significantly. Going back 10 years, it really started
with the financial crisis, there was NatCity (National City Bank) that was acquired. As you know, a lot of banks ran into trouble during that time. It was a transaction that allowed PNC to grow pretty significantly. Then in
2012, the bank acquired RBC Centura, which was RBC’s kind of U.S. arm. So those two transactions made us what I would call a super-regional bank with a footprint from northern New Jersey down to Florida. That put PNC in a trajectory to allow us to have the opportunity to remain independent. And with the
BBVA transaction, PNC, now a top 10 bank, is in a position to be independent for the future.
Q: I saw that PNC recently closed branches in many Midwestern states. Why?
A: What you’re seeing with any bank is everyone’s evaluating their branch footprint. Going back to that omni-channel conversation we just had, people still want to have access to a branch within 10 minutes, but
less people come in and cash a check or transact here. More of that happens digitally now. So some of the branch footprints, particularly in legacy markets, may have been designed for when the consumer engaged differently with the branch.
The other thing you’re seeing us doing in those markets is replacing some existing branches with what we would call more of a “solution center,” which is less about a teller line and a drive-thru and more about individual stations for a customer to walk in and be helped by a customer service person. They’re a little smaller from a footprint standpoint, designed to be a little more comfortable with a couch and some high-top chairs.
Q: Is this an era of consolidation in the banking industry? A: It is a constantly consolidating industry and will continue to be so for a variety of reasons. PNC, we’ve positioned ourselves to be a consolidator in that industry and have had the opportunity
to do so.
Q: Is there any simple answer you could give as to why banks are consolidating? I know it could probably be a lecture.
A: A couple things. If you think about the way a consumer wants to be engaged with right now, omni-channel is really important. As a consumer, you want to be able to engage digitally, in an app, on a website. If I have a problem, I still want to be able to walk into a branch. That’s a pretty expensive model, right? And technology is very expensive. So in order to continue to invest in that technology, banks have seen value in combining to build some scale there. And that’s the same thing on both a consumer and a commercial or corporate side.
The other thing that’s happened — we’ve been in a low interest rate environment for what seems like forever. It’s starting to increase, but it’s been low. If you think about a smaller community bank, primarily they’re going to take deposits and make loans, and that spread between those costs of deposits and the loan rate is where you make money. As banks come together, there are typically, to that technology platform, more opportunities for fee business, with those additional products and services that can be offered in a broader bank. So some of the economics have driven that as well.
And then the other thing that just happened, strategically, is for a bank to build out a new market, there’s a time and investment that comes along with that. So if you want to come into, let’s say, Texas, like PNC clearly did, the rationale for a merger-acquisition can make a lot of sense. Hey, we just get big in Texas really fast and hit scale in this market faster, making an acquisition versus opening market-by-market and investing those resources.
Q: You mentioned our era of low interest rates. Has that been good for banking?
A: I think there are positives and negatives to it, right? I would say from a standpoint of being a borrower, it has been an excellent time. For banks, that’s fine. If you look at mortgage rates now, if you bought a house or took a mortgage the last few years, it’s been really low. In business, your borrowing costs have been low — that’s allowed you to expand your business, maybe, in a way that you couldn’t have in a higher interest rate environment.
Q: Do you think anything is lost in the consolidation, with so many banks being national versus local?
A: I think there’s a place for both. I think the reality is, if you look at the market, small community banks serve, generally, a piece of the market. The larger national banks have certain pieces in the market. We can both do it well and I think we should have both.