Bank One Slaps Restrictions On Corporate Lending

June 5, 2002
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GRAND RAPIDS —  Bank One Corp. plans to halt lending to large corporate clients that don’t use the bank for any ancillary services, but the new policy is expected to have a negligible affect on the bank’s West Michigan market.

The policy targets loan-only corporate customers with annual sales in excess of $250 million, basically those that fit the Fortune 1,000 profile, said Mary Kay Bean, corporate communications spokesperson in Bank One’s Detroit office.

“By definition, they’re going to be a much smaller group than our middle market customers, which we define as businesses with sales of $5 million to $250 million.”

Bank One’s middle market customers outnumber its large corporate customers 10 to one. Nationwide, it has about 18,000 middle market customers compared to 1,800 large corporate customers, Bean said.

There’s an even greater ratio of middle market customers in Michigan, she added.

“The universe of large corporate customers in your area is a lot smaller than that universe of middle market customers, which is huge.” 

Not only is the market huge, but middle market customers also reward the bank more often with more profitable ancillary business in addition to their loan business. They use a broad array of products and services, and those mutually beneficial relationships provide Bank One with a good return, Bean said. It’s that “deeper relationship” that Bank One is after.

“As far as the large corporate clients are concerned, we would like them to do the same thing our middle market customers do — buy additional products and services like capital market services, risk management or cash management.” 

Late last year the bank began “frank but respectful” one-on-one discussions with all of its large corporate customers. Of those corporate customers who did not have deeper relationships with the bank, some were asked to reduce borrowing and buy more fee-based products, Bean explained. 

In other cases, loan-only customers that showed no willingness to change the relationship and hire the bank for additional services were asked to end the relationship when their current loan was completed.

Jamie Dimon, Bank One’s chairman and CEO, told the Financial Times that about 15 to 20 percent of the bank’s 1,800 corporate clients were credit-only customers.

“Business customers may understand this. They do the same thing with their customers,” Bean added. “We’ve actually gotten some more business from the large corporate clients as a result of the discussions.”

The bank’s West Michigan presence includes Kalamazoo, Benton Harbor, the Lakeshore and Grand Rapids. As a large middle market bank here, Bank One is satisfied with its client relationships, said Richard Haslinger, Bank One president, West Michigan.

The policy is not an issue locally or in the western Michigan area in general because the bank’s West Michigan clients regularly use other Bank One services, he explained.

Most small to mid-size business customers tap a single bank for most or all of their services, whereas a $1 billion company might deal with seven different banks simultaneously but doesn’t maintain deposit accounts in all of them.   

“The clients we serve in the small business market usually have one bank, so we provide many other services regularly,” Haslinger said. “If a large corporate client has seven banks lending to it, that’s the issue they face. They have the tension of trying to split up a defined amount of business or not. And that’s the tension of the issue in the large corporate market nationwide.”

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