There’s a new trend developing in California — a host of big national banks storming the state and potentially knocking smaller regional banks out of business. Why the sudden interest in California?
The Los Angeles Times is close to the action, and it’s reporting that banks with home bases outside the state like JPMorgan Chase (Stock Quote: JPM) and U.S. Bank (Stock Quote: USB) are crashing the California bank party and are “aggressively courting” Golden State customers.
That has set off a domino effect this summer that has established California banks like Bank of America (Stock Quote: BAC) and Wells Fargo: Stock Quote: WFC) fighting back with some new customer retention campaigns designed to cordon their customers off from out-of-state banks.
The Battle of the Goliaths could also push regional banks to the margins, as customers begin to choose from a menu of new appetizing deals like rebates of 5% on debit-card purchases and bonuses of $100 for new customers.
“Bank of America Corp. and Wells Fargo & Co. have long dominated that market in California," The Times reports. "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.”
Among those new competitors, Chase (with $1.7 trillion in assets) and U.S. Bank ($280 billion in assets) are swinging from the heels. The former now has 700 branches inside California and U.S. Bank has 600 locations in the state. U.S. Bank’s Southern California Regional Chairman Sean Foley told the Times that U.S. Bank’s goal is to move from the middle of the pack, in terms of market share, to "top-notch.”
Why is California such an appealing battleground for big banks — and for banks that want to become big banks? California's vast consumer base — 37 million customers — overshadows concerns like double-digit unemployment and a state government that is billions of dollars in debt. As Foley told the Time, "This is where the population is, this is where the growth is, this is where the wealth is.”