Wells Fargo Just Gave Small Banks a Big Gift

Community bankers are sensing a chance to poach clients from Wells Fargo as the financial giant struggles with a phony-account scandal.

Wells agreed to pay a $185 million fine, but the reputational toll could be much worse as negative press promises to extend into another week. It would please some executives at smaller institutions if such coverage lingers on even longer.

First Green Bancorp, for instance, is already in talks with its public relations team and an outside ad agency about ways to "pull out all the stops" to differentiate itself from Wells and other big banks, said Ken LaRoe, the Orlando, Fla., company's chief executive. He is also considering working with other area banks on an even bigger ad campaign.

"The main reason I want to do it is because I'm so sickened by the behavior of the big banks" that "continue to do slimy, scummy things," LaRoe said.

"I look and see what can really happen when you use businesses as a vehicle for good, as opposed to a vehicle for even evil," LaRoe added. "It's just disgusting that these banks haven't been punished or brought to their knees after they ruined the entire world economy."

It is unclear what kind of an impact, if any, a marketing campaign could have on Wells' customer base. The San Francisco company, for instance, is the third-largest bank in the Orlando area with $6.3 billion in deposits, or nearly 15% of the market, based on the latest data from the Federal Deposit Insurance Corp.

Broadly, advertising could usher in a new round of finger-pointing that has occurred often since the financial crisis, and smaller institutions will be tempted to use the scorcher at Wells to fortify an argument that big banks are too big to manage. It is worth noting that community banks, on average, rely less on noninterest income to boost revenue than their bigger brethren.

The scandal at Wells is "one of the biggest blunders" by a bank that is unrelated to credit quality, said Tom Hall, president and CEO of Resurgent Performance in Atlanta. "To me, this is kind of devastating from the trust standpoint," added Hall, who has at times worked with bigger banks over his nearly 40 years in the industry.

While smaller institutions should try and capitalize on the Wells debacle, the key will be keeping the message positive, industry observers said.

"Long term, nobody likes a hater," said Chris Lorence, chief marketing officer of the Independent Community Bankers of America. "Talk about what you do well, not what someone else doesn't."

Any marketing needs to "tastefully" underscore the trust factor that people equate with community banks, Hall said. "Banks have to use this as an opportunity to create more trust with the children of the baby boomers that like the big banks," he said.

"Come back to the small-town bank, your community bank; we're not pushing the services, we're here to solve your problems," Hall added, tossing out several potential advertising concepts. "I think this is a great time for banks to leverage that."

Keeping things positive could prove challenging for the outspoken LaRoe. "I tend to go for the below the belt, so I'm going to seek wise counsel," he said.

"I'm sure my friends wouldn't want to do a below-the-belt thing," he added.