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When Webster Bank expanded into Boston in 2016, its goal was to raise $1 billion in deposits within the first five years. And at the beginning of this year, the bank reported being on target to hit that goal.
But in its most recent earnings call, the bank now says it has fallen behind on deposit acquisition due to fierce deposit competition. The bank said it has about $500 million in deposits at its Boston branches almost three years into its five-year plan.
“The most aggressive market for us is the metro areas such as Boston, and New York to some extent, but Boston has been very high as a market,” Glenn MacInnes, CFO of the company, said on a recent earnings call. “So a lot of our promotional pricing to the extent we do it is in the Boston market. So that’s where we are seeing most of the pressure on higher costs.”
Competition over deposits has ramped up in the Boston area as the economy has grown. Smaller banks such as Berkshire Bank and recently Rockland Trust have made big investments and grown their operations in the city.
At the same time, big banks have come knocking as well. JPMorgan Chase has already received approval to open six retail branches in the area, with plans to eventually open 50 retail branches in Eastern Massachusetts. M&T Bank on a recent earnings call has also said it would also like to expand into the Boston and Massachusetts markets.
When Webster came into the Boston market, it opened a number of de novo branches and also purchased branches from Citibank, who tried and failed to build a Boston presence. As of October, Webster had 33 branches in the Boston area, according to the FDIC.
MacInnes said on the earnings call that Webster is planning to lease a portion of its Harvard Square branch, as part of its overall strategy to cut square footage from its physical presence.
It’s not all bad news: John Ciulla, president and CEO of the company, said the bank is ahead of its five-year loan plan marginally and has just reached its full contingent of seven business bankers in Boston market.
“The market as a whole for us is still really strategically important and we continue to be very optimistic,” he said. “Those banking centers are really necessary to provide coverage and momentum for those business bankers and we’re seeing a pipeline build there. We’re cross-selling our middle-market and corporate customers in Boston banking work which we couldn’t do before we had a banking center network.”
