A New Equation in Local Banking

Citi-Wachovia Deal to Put a Quarter of Area's Deposits Under One Roof

The merger yesterday of Wachovia and Citigroup combines two of metropolitan Washington's largest banks, creating a potential powerhouse accounting for nearly a quarter of the region's deposits.

Wachovia was the region's largest bank, with $20.8 billion in deposits in 2007, and its combination with Citi, the seventh-largest, left local community banks taking stock of their own role in the marketplace.

"It's been a tough day for us and for our employees, but a day we are focused on doing what we normally do," said Sam Schneider, Wachovia's mid-Atlantic regional president. "We are talking to our clients extensively . . . We are open for business. Their deposits are safe. Their credit lines are available."

Schneider said it was too soon to gauge the effect that the merger would have on the banks' Washington-area employees. He declined to comment on whether any branches would close, saying it was too early in the process, but noted that there were relatively few places in the region where the two institutions compete head to head.

"There is very little overlap, if any, in this marketplace for what we do versus what Citi would like to do," Schneider said.

Wachovia and Citi have a total of about 450 branches in Maryland, Virginia and the District.

Some local bankers said the merger of two national players could be an advantage for smaller institutions that base their appeal on being community banks.

As national franchises, Wachovia and Citi probably are "not looking to expand their small to mid-size local customer relationships like community banks are," said Ronald D. Paul, chairman of EagleBank, a Bethesda-based bank with $1.5 billion in assets and 15 branches.

Peter Converse, president of Virginia Commerce Bank, which is based in Arlington and has $2.6 billion in assets and 26 branches, was more circumspect, aware that a blizzard of bad news can frighten customers.

"It's a dual-edged sword," Converse said. "On the one hand, it creates customer paranoia that works to the advantage of community banks. On the other hand, a bank that large having that significant difficulties and the need to be taken over overnight just fans the paranoia nationwide about the safety of existing banks. It creates a lot of hand holding that banks have to do with their customers to assure them their deposits are safe."

Robert L. Johnson, chairman and chief executive of RLJ Cos. and president of Urban Trust Bank was also looking at the big picture.

"If solving Wachovia by basically having Citi or somebody ultimately take it over helps wipe its slate clean of bad assets and gets banks into the marketplace . . . that's the key issue for me," said Johnson, who also runs a private-equity arm.