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Baby Banks Ate New York.

Chase and Citibank left a void—and they’re paying for it. But what’s a Wachovia?

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Exit Grand Central Terminal to the east, and you’ll find yourself smack in the middle of bank-land. Wachovia, the North Carolina behemoth, is fitting out the corner of 42nd Street and Third Avenue—one of fourteen branches it now has in midtown. There’s a new Chase at Lexington and 43rd, right across the street from a new Bank of America. At 43rd and Third stands a new shiny, happy Commerce Bank. Two blocks north, an Independence Community Bank is about to open.

This is not just happening in midtown. After years in which banks disappeared, virtually every empty storefront seems to be morphing into one. In 2004, 27 new branches opened in Manhattan. The boom is a delayed reaction to the relentless consolidation of the nineties. (Merger connoisseurs will recall that Chemical Bank, which ate Manufacturers Hanover, merged with Chase, which in turn merged with J.P. Morgan, which then merged with Chicago’s Bank One.) The logic of amalgamation: Close expensive, overlapping branches, then drive customers online or to ATMs. Between 1994 and 1997, 233 branches were shuttered in the five boroughs.

Meanwhile, the business models of the longtime retail-banking market leaders—JPMorgan Chase and Citigroup, with 36.5 percent and 25 percent market share, respectively—shifted away from low-margin, low-prestige businesses like checking and small-business loans to high-margin, high-prestige businesses like peddling stocks to rich folks and advising Fortune 500 companies. Citigroup chairman Sandy Weill found private equity and IPOs far more glamorous than pitching CDs to retirees on the Upper West Side. Its branches declined into dark, utilitarian spaces with constricted hours.

But these veteran Gothamites overlooked one of the most powerful components of the city’s DNA—its social and economic dynamism. New businesses are constantly forming, and there’s a steady influx of new residents. All have banking needs. And whether you were a restaurateur in Park Slope or a newly arrived M.B.A. from Duke, Chase and Citi made it eminently clear they just weren’t that into you.

Enter out-of-towners like New Jersey–based Commerce Bancorp, the first metrosexual bank. It now has 36 splashy, bright “stores” in New York, complete with wood paneling, granite counters, and marble floors. They’re also open Sundays and offer free coin-counting service.

What these nouvelle banks are proving is that even in the age of automation, people still like to be coddled. And with mortgage refinancing having cooled, banks from all over are searching for customers to whom they can sell home-equity loans and credit cards. Chase, for its part, has begun to get back in the game and has, at long last, invested in new branches. Expect the competition to intensify. Despite all this recent activity, there are still 78 fewer banks in Manhattan today than there were ten years ago. With almost $430 billion in deposits to fight over, the bank war is just getting started.


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