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Commercial Banking

Industry Overview

Asked why he robbed banks, Willie Sutton replied, "Because that's where the money is." That was in the '30s, but even today, despite changes, a lot of the money is still in commercial banks. Most of us maintain checking accounts at commercial banks and use their ATMs. The money we deposit in our neighborhood bank branch or credit union supports local economic activity through small business loans, mortgages, auto loans, and home repair loans. The bank also provides loans in the form of credit card charges, and it renders local services including safe deposit, notary, and merchant banking. The bank branch or credit union office remains the cornerstone of Main Street economic life.

Consolidation and New Jobs
For decades, banks profited by simply holding customers' money and charging them check writing fees and interest on loans. Jobs were well defined and stable, and promotion paths were clear and secure. Not anymore. Consolidation, competition, and technological change are shaking the industry to its core, forcing layoffs but also creating opportunity.

Since 1995, more than 200 large and small banks have merged. Several of these and a handful of recently consolidated giants -- Citigroup, Bank of America, Bank One -- dominate the banking industry. The new behemoths are entering new markets, while at the same time closing branches and replacing service personnel with online and other technologies. However, hiring by a growing number of nonbanks compensates for this trend to a degree. These firms, which are pioneering new ways of delivering financial services, include MBNA and Capital One, which are credit card lenders; transaction processing and data services like First Data and Fiserv; and bill-payment-services marketers like MFSDC and Integrion.

Deregulation
The Glass-Steagall bill, passed by Congress in 1933, served as the backbone of banking regulation. During the late '90s, however, banks and other financial institutions found ways around the restrictions placed on them by Glass-Steagall and related legislation. Finally, in late 1999, Glass-Steagall was repealed, eliminating the legal framework for Depression-era boundaries that had already been abandoned by large financial services firms, including banks.

In theory, the repeal of Glass-Steagall opened the floodgates to consolidation, spawning superfirms that will offer banking, insurance, and securities. However, big firms are already doing this through affiliated companies -- Citigroup, for example, offers insurance through its Travelers subsidiary -- so the impact of the Glass-Steagall repeal remains to be seen.

Problem Loans and Lower Profits
The recent spate of corporate accounting misdeeds, and the resulting bankruptcy of some companies, means that some banks are stuck trying to recoup loans from corporations that are cash-starved. On the consumer side of the business, in January 2002, 4.9 percent of all home loans were past due, a full point higher than a year earlier. And the average household has $8,000 in credit card debt, up from $3,000 in 1990. Profits at deposit-taking banks declined 5 percent in 2001, and in the current economic environment, banks' performance could get even worse.

As a job seeker, the most important distinction to keep in mind is between regional banks and the big global ones. Here we've broken down the industry by type of banking, rather than size of player, since banks are increasingly adding new services to their array of traditional ones.

Consumer or Retail Banking
This is what most people think of when they think of banking: A small to midsized branch with tellers and platform officers -- the men and women in suits sitting at the nice wooden desks with pen sets -- to handle customers' day-to-day needs. Although thousands of small community banks, credit unions, and savings institutions still exist, employment opportunities are increasingly coming from a few megaplayers such as Citibank, Bank of America, and Bank One, most of which seem hell-bent on building national -- and even international-banking operations.

One complicating factor in this picture is that the banks mentioned above, in addition to extending their consumer-banking operations, have added to their portfolios by strengthening their investment-banking and asset-management capabilities, among others. So, if you want to work at a Citibank branch, make sure that you're applying to the right part of the organization.

Business or Corporate Banking
Many of the players in this group are the same ones in the consumer-banking business; others you'll find on Wall Street, not Main Street. At the highest level, the larger players (Bankers Trust, Bank of New York, and J.P. Morgan Chase & Co. being three names to add to the list of megaplayers above) provide a wide range of advisory and transaction-management services to corporate clients. Depending on which institution and activity area you join, the work can resemble branch banking or investment banking.

Securities and Investments
Traditionally, this field has been the domain of a few Wall Street firms. However, as federal regulations have eased, many of the biggest commercial banks, including Bank of America, Citibank, J.P. Morgan Chase & Co., and others, have aggressively added investment-banking and asset-management activities to their portfolios. For people interested in corporate finance, securities underwriting, and asset management, many of these firms offer an attractive option. However, the hiring for these positions will frequently be done separately from that for corporate and consumer banking.

Nontraditional Options
Increasingly, a number of nonbank entities are offering opportunities to people interested in financial services. Players include credit card companies such as American Express, MasterCard, and Visa; credit card issuers like Capital One and First USA; and credit-reporting agencies such as TRW. Although people at these firms are still in the money business, the specific jobs vary greatly, perhaps more widely than jobs at the traditional banks do. In particular, given the volume of transactions that many of these organizations handle, there are excellent opportunities for people with strong technical skills.

Banks remain in the business of profiting from other people's money, but now they need to do it in as many markets at home and abroad as possible, as aggressively as possible. Competition has forced banks to move quickly and more creatively into mortgage lending, securities and derivatives trading, and transactions processing.

Throughout banking there are positions for people who understand technology, the full gamut of financial services, and how to market to new customers. Banks also employ sales and marketing staffs, developers of new products, mortgage and securities experts, and credit analysts. At the same time, though, banks have taken a hit during the current down cycle of the economy, so the opportunities to get into banking are fewer and farther between than they have been in some time.

Banking and bank-related work are a good fit if you know something about finance and you like software development; if you're interested in marketing and sales; if you're a business school grad and you want a solid career start; if you're not a B-school grad but you're looking for work experience the equivalent of an MBA; if you're fluent in Spanish, Japanese, or another language and you want to live overseas for a few years; or if you just want the know-how to eventually start your own business. One thing about banking skills: They are extremely useful and portable. So even if you join a bank that gets gobbled up by a competitor and you end up a merger casualty, you can usually transfer your expertise somewhere else with relative ease.

Major Players 10 Major Banks, Ranked by 2001 Revenues
Rank	Bank	Revenue ($ millions)	Profit ($ million)	# of Employees
1	Citigroup	112,022	14,284	268,000
2	Bank of America	52,641	6,792	142,670
3	JP Morgan Chase	50,429	1,694	95,812
4	Wells Fargo	26,891	3,423	119,714
5	Bank One	24,527	2,638	73,519
6	Wachovia	22,396	1,619	84,046
7	FleetBoston	19,190	931	55,909
8	Washington Mutual	17,692	3,114	39,465
9	U.S. Bancorp	16,443	1,706	49,955
10	MBNA	10,145	1,694	25,247
Source: Hoovers.com

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