Rebates of 5% on debit-card purchases. Bonuses of $100 for new customers. The way things are going, banks in California may start giving away toasters again if you open a checking account.
Having battled through the near-meltdown of the economy, America's biggest banks are squaring off in a more traditional war. They're now fighting for retail and small-business customers in the Golden State.
Bank of America Corp. and Wells Fargo & Co. have long dominated that market in California. But a massive shakeout of financial institutions nationwide has large new competitors moving in, eliminating many medium-size banks and thrifts that once presented an alternative to Californians.
New York-based JPMorgan Chase & Co. now has more than 700 California locations after taking over failed savings and loan colossus Washington Mutual, and it's planning to open hundreds more of its Chase-branded retail branches, said its head of retail banking, Charlie Scharf.
Meanwhile, U.S. Bancorp of Minneapolis has become a huge player in the state with about 660 branches after acquiring Downey Savings, Pomona First Federal Bank, California National Bank and other meltdown victims.
A so-called super regional bank, U.S. Bank falls far behind the national giants in total assets with $280 billion, compared with $1.1 trillion for Wells, $1.3 trillion for Citibank, $1.5 trillion for BofA and $1.7 trillion for Chase. But in the California retail battle, U.S. Bank is aiming "to move from the middle of the pack, in terms of market share, to top-notch," said its Southern California regional chairman, Sean Foley.
If this worries San Francisco's Wells Fargo, its president of retail operations for California, Lisa Stevens, isn't letting on. Wells has 1,043 branches in California, and Stevens said the bank already serves one in three households in the state — and wants more.
"I'd like to see it become one in every two households over the next five years," Stevens said.
Bankers say the intensifying battle is a testament to the allure that California's 37 million consumers represent despite the state's current double-digit unemployment and gaping budget deficit.
"This is where the population is, this is where the growth is, this is where the wealth is," Foley said.
Rodney K. Brown, president of the California Bankers Assn., noted that California once had a slew of large, homegrown, full-service banks that have since merged into bigger and stronger rivals: Crocker in San Francisco (acquired by Wells Fargo), and Security Pacific and First Interstate in Los Angeles (acquired by Bank of America and Wells, respectively).
The large savings and loans that once dotted the California landscape filled some of the gaps. Those that survived the late 1980s thrift industry meltdown were combined into Washington Mutual (Home Savings, Great Western) or into Golden State Financial (First Nationwide, Glendale Federal, California Federal), which Citigroup bought in 2002.
With New York giants Citibank and Chase on the scene, "once again you're seeing a broader large-bank presence," Brown said. With regional and local banks competing as well — and attracting considerable attention as alternatives to the too-big-to-fail crowd — he added: "It's good for California consumers and businesses."
The competition means Californians often get better-than-average deals on bank services, according to a survey of big banks and thrifts by Bankrate.com.
The Los Angeles area has above-average yields on certificates of deposit, the survey found, while San Francisco is in line with the national average.
California overdraft fees are among the lowest in the country, Bankrate.com said, with L.A., San Diego and San Francisco the lowest of 25 markets surveyed. The lowest charges are in the low $20s range or even the teens, compared to the mid-$20s range in most other places, Bankrate senior financial analyst Greg McBride said.
ATM fees charged when a customer uses another bank's ATM are also lower than the national average, McBride said. But ATM surcharges — the fees charged by a bank to a noncustomer — are higher than average. More than half of California banks charge $2.50 or $3, at the high end of the range for this service, making up some of the margin they lose on other services by dinging customers of rival banks.
Chase and Citibank, each with about $60 billion in California deposits, are courting new customers with promotions.
At Citi, customers opening a higher-end checking account will get 5% back on debit-card purchases until Nov. 30 if they spend at least $250 a month on purchases requiring signatures rather than personal identification numbers (the banks make more money from merchants that way).
Chase is offering $100 to new customers in areas it has targeted for expansion, including anyone who opens a checking account at one of its new branches. It will open about 90 of those in California this year, 40% of them in supermarkets, a spokesman said.