Oligopoly brief: Wachovia
Wachovia (jokingly pronounced by customers as "watch-over-ya", "we cover-ya" or "walk over-ya") is the US's fourth largest bank holding company by assets (behind Citigroup, J.P. Morgan Chase, and Bank of America) and third largest full-service brokerage (behind Merrill Lynch and Citigroup). The company is growing fast, with major recent increases in earnings that surpass most of its rivals'.
Wachovia operations are strong along the East Coast, from Connecticut to Florida. Its most recent announced acquisition, Alabama-based SouthTrust, will strengthen its position throughout the southern US and Texas. In addition to commercial banking, Wachovia is in the mutual funds business (Evergreen Investment management) and wealth management (OFFITBANK). Its brokerage subsidiary, v. picked up major market share with the 2003 acquisition of a majority interest in Prudential Brokerage Management Services.
Wachovia is named after an area near Winston-Salem, NC settled by the Moravian (Czech) immigrants. The bank was founded in 1879 and was a major player in the tobacco industry, working with Winston-Salem based R.J. Reynolds.
The company became a real powerhouse in 2002 firm a merger with Charlotte (NVC)-based First Union. In fact, that bank, which was larger, did the acquiring, but took n the Wachovia name.
First Union was the product of around 80 mergers itself. It started life as Union National in Charlotte, NC, in the early 1900's. In 1958, Union National merged with First National Bank and Trust Company of Asheville (NC). First Union bought Philadelphia-based CoreStates in 1998. One of the curiosities in Philadelphia is that the arena for the NBA 76ers has been changed from CoreStates Center to First Union Center to Wachovia Center in the space of five years.
First Union has had some rocky acquisitions, It acquire d The money Store, a loan company specializing in sub-prime loans in 1998, and had to stop it in 200, taking a $2.8 million charge. The Money Store had over 150 branches in all 50 states. According to a BusinessWeek story ("First Union Turns Gold into Straw", 5/18/2000): "Former employees and competitors say that neglect, overcaution, and broken promises have brought the unit down." According to the story, many of the best employees were laid off. Out-and-out mismanagement sunk the chains, though some of the more profitable areas (mostly small business loans) were retained.
The CoreStates acquisition was almost as bad. A rush to integrate the two operations got tangled in errors and lost the company customers and profits. Customer service fell off badly, and approximately one fifth of CoreStates customers left for other banks in the first six months.
But companies can learn. The First Union/Wachovia merger on the other hand is generally considered to have been a smooth, gradual process, a model for other bank mergers. With the need to convert over 11 million accounts, 2,600 branches, and 4,500 ATMs, not to mention signage, the company had its work cut out for it. According to an article in Computer World, ("Methodical Merger: First Union and Wachovia," 3/21/04) The best moves included:
- "teams from Wachovia and First Union had to decide which of the two companies' systems would prevail for each operation, such as direct deposits or check processing."
- "decided to convert customers to various systems using a state-by-state approach, working from south to north. " This included extensive testing training in each state.
- "Tried to retain top-performing staffers, including its IT workforce."
Some recent acquistions
