Yet another bank plans office here: Why?

Ridgefield (Connecticut) Press

Author(s): Chipp Reid; Press Staff Date: June 28, 2007 Section: News

A funny thing happened on the way to commercial development in town … another bank decided to call Ridgefield home. HSBC, the Hong Kong and Shanghai Banking Corp., is set to open a branch in Ridgefield in April 2008. When the 108 Danbury Road office opens, it will be the 15th bank office in town.

Ridgefield is currently home to 14 branches of 10 banking corporations. Ridgefield Bank has three branches, while People’s Bank has two. The two People’s branches are within a stone’s throw of one another, with one at 66 Danbury Road and the other at the Super Stop & Shop.

“There always seems to be cars and people in the banks,” said Robert Cassella, chairman of the Economic Development Commission. “Everybody seems to be busy and everybody seems to be making money.”

Ridgefield, with its reputation for affluence, is a prime target for banks. However, Francine Minadeo of HSBC North America put it this way: The “Ridgefield branch is part of HSBC’s overall expansion plan for Connecticut, as we believe residents of Connecticut have a strong affinity and traction for the HSBC brand.”

HSBC plans to open 10 branches this year in Connecticut. The proposed Ridgefield branch, with its 2008 opening, is part of that expansion. Ms. Minadeo said the large number of commuters in town also makes Ridgefield an attractive expansion target.

“With our strong presence in metro New York, Connecticut is a natural place for HSBC to continue its U.S. expansion,” she said. “We look forward to serving the needs of individuals and businesses who live and work in the state.”

When is it enough?

As news of the proposed HSBC branch filtered out, a collective “not another one!” was heard around the village. Although more commercial development eases the tax strain on individual property owners, the question remains whether the town needs a 15th bank.

“It’s definitely oversaturation,” said Steven Fried, a principal at Capital Finance, an Indian Wells, Calif.-based bank industry think tank.

“A little competition is good,” Mr. Fried said. “When the locals start saying, .Not another bank, ‘ things have gone too far.”

Mr. Fried also questioned why, other than Ridgefield’s reputation for affluence, HSBC would open a branch in town.

“They’re a credit card and mortgage bank,” he said. “They aren’t known for their service, and in towns like Ridgefield, where wealthy people can basically do business anywhere, they expect extras, they want customer service.”

Banks are one of the more popular forms of corporate real estate development in town, mostly because of their return, Mr. Cassella said. Unlike restaurants or even traditional retail stores, “a landlord typically sees a higher return with a bank tenant because a bank will pay retail-rate rent without all the fit-out costs,” he said.

Banks also won’t “pollute the property and [they] pay their rent on time every 30 days,” Mr. Cassella said.

“That’s true,” Mr. Fried said. “There is a lower overhead for a bank than for many other types of service-related industries. The thing is, for a branch to be successful, it needs to have at least $30 million in assets. I just don’t see HSBC getting near that number. They would have to issue an awful lot of credit cards.”

HSBC could face a major battle in just breaking in to the market. Ridgefield Bank – which is now Fairfield County Bank Corp. – owns a 45% market share of the business in town, according to statistics from the Federal Deposit Insurance Corp. Washington Mutual is last, with just a 0.24% market share. Three branches – Washington Mutual, NewMil and Citibank – all have deposits under the $30 million threshold.

“That’s a little bit of an old rule of thumb, but it’s still a good measure of a branch,” said Ridgefield Bank CEO Gary Smith. “When you think about a town of 25,000 people, with 8,000 households and now there are going to be 15 branches, that’s not a lot of households to go around per branch.”

Easy money

At the same time, town zoning regulations make it easier for a landlord to market property to a bank than to a potential restaurant or retail store. Banks require far fewer parking spaces than either eateries or stores and also do not require as much lighting at night.

“Light pollution” and parking are common faults the Planning and Zoning Commission finds in commercial projects. Drugstore giant Walgreens recently went through a protracted approval process at the zoning commission because of those issues.

Banks also provide an incentive for landowners as they continue to expand their presence. Mr. Cassella, who is a commercial Realtor, said his office “is talking with two or three more banks” about space in town. He also said the seeming oversaturation of banks “is not unique to Ridgefield.”

“We have the same banks opening multiple branches,” he said. “It became a phenomenon eight, 10 years ago. Before that, banks were a little gun-shy about expanding because of the price of real estate. Now that’s changed.”

Fairfield County in general has experienced a proliferation of banks in the past decade. The presence of Fortune 500 company headquarters and a mobile population makes the area a lucrative target, Mr. Fried said. However, he also said the market had a breaking point.

“There are all sorts of reasons why a bank wants to get into a market,” Mr. Fried said. “Let’s say Citibank decides to buy a privately owned bank with 15 branches outside St. Louis. It does so because it wants to get into that market and it’s actually easier and less expensive to buy a small bank that is already established. For HSBC, it sounds like branching run amok.”

Copyright, 2007, The Ridgefield Press