National Banking Analyst Sees National Trends in the Huntington-FirstMerit Merger
A national banking analyst with ties to Northeast Ohio, says the merger of regional powerhouses Huntington Bank and FirstMerit is catching industry-wide attention.
Rick Parsons grew up in Avon Lake before 30-plus years in banking that took him to an executive vice
presidency of Bank of America. He now writes about the business, is an independent management advisor and conducts seminars, including with the Ohio Bankers League – the century-old association of financial institutions in the state. And, he uses his Ohio’s roots in another way, too -- as a research base for projecting banking trends.
“'As Ohio goes’ in presidential elections is true for banking, too.” The state is a microcosm of the nation…with the same mix of mega-banks, midsize, regional banks, and local banks. “When I see a merger of a FirstMerit and Huntington, in my view, it’s a really, really, big deal.”
In terms of trends in Ohio that are also seen nationally, Parsons sees “significant consolidation, across the board.”
The industry has gone from nearly 20,000 banks in the 1990 to less than 6,000.
The answer to “why this industry is shrinking is the same answer as why Huntington and FirstMerit merged," Parsons says:
The economics of banking, with steadily increasing cost and flat income growth, is making bank stocks less attractive to investors. Huntington’s and FirsMerit’s stocks are valued lower now than at the turn of the millennium. Merging is a way for banks to consolidate personnel -- where more than half of their controllable costs lie -- and cut costs by cutting jobs.
A merger also reduces the number of competitors in the marketplace. That can affect customers, though it usually does not since there is still generally a lot of competition.
There is also a factor in this merger of bringing together two banks that are historically “very well run.” And, though they are regional, “these are big players," Parsons says. Huntington is a top 25 bank nationally and FirstMerit is top 50. If they merge, people around the country “take notice.”