Many S&Ls; Change Name to ‘Bank’ in Bid to Aid Image
If it looks like a bank and calls itself a bank, is it a bank?
It’s getting harder to tell.
With savings and loans changing their names to bolster their images and lure new customers, the odds are increasing that an institution that calls itself a bank may not be a bank at all.
Take Glendale Federal Savings & Loan. Moving to avoid the stigma brought on by the thrift industry crisis, it changed its name to Glendale Federal Bank two weeks ago. Its new name, Glendale Federal says, conveys “a solid image consistent with our reputation.”
Other California thrifts have made similar name changes. San Diego-based Great American First Savings Bank switched to Great American Bank last month. Great Western Bank in Beverly Hills dropped the word “savings” from its name in 1987. And San Francisco-based First Nationwide Bank took its present name in June, 1986, six months after it was bought by Ford Motor Co.
Glendale Federal--and other thrifts--contend that the word “bank” more accurately reflects their business. Once confined to mortgage lending, S&Ls; now provide checking accounts, make car loans, issue credit cards and provide other services traditionally performed by banks. “It makes sense to use a name more appropriate to our full-service financial operation,” said Norman M. Coulson, Glendale Federal chairman and chief executive.
No less a factor in Glendale Federal’s decision was the condition of the savings and loan industry. As a whole, the savings and loan industry lost $12.1 billion in 1988, and the government agency that insures S&L; deposits is insolvent.
First Converted
“We’ve felt for some time that well-managed S&Ls; are painted with the same brush as weak and unprofitable savings and loans,” said Roger Rittner, a Glendale Federal spokesman.
Other S&Ls; are expected to adopt the word “bank” to protect their image. “Savings and loans have a real image problem right now,” said San Francisco consumer advocate Ken McEldowney. “My guess is that the institutions are doing focus groups and coming up with the fact that it is really detrimental to be called a savings and loan.” (Focus groups are groups used in marketing research to determine consumer attitudes.)
Glendale Federal and most other thrifts that have changed their names to “bank” did so after first converting from savings and loans to “savings banks.” Both savings banks and S&Ls; are thrift institutions, and their deposits are insured up to $100,000 by the Federal Savings and Loan Insurance Corp. Though savings banks once held broader lending powers than S&Ls;, today the name is the biggest distinction between them.
The name switching has drawn criticism, especially from commercial bankers who think that thrifts are trying to capitalize on the banks’ brighter image with consumers.
“The name ‘bank’ has value. Banks are viewed as safe, competent and so forth,” said David Ballweg, president of Community State Bank in Union Grove, Wis. and a vice president of the Independent Bankers Assn. “I have some personal concerns about them using the word (bank) without them changing their charter and legally becoming a bank.”
The name changes have also met criticism within the thrift industry. “It’s a pretty transparent change,” said Johanna la Toure, vice president with Home Federal Savings & Loan in San Diego. She said recent research by Home Federal showed that consumers do not reject S&Ls; out-of-hand but distinguish between healthy thrifts and troubled ones.
“Consumers are savvy. They know what’s going on,” La Toure said. “They’re looking at our financial condition, not our name.”
But Ballweg contended that name switching on the part of S&Ls; confuses customers. Though banks and S&Ls; provide many of the same consumer services, they are different in other ways, he says. Banks have a broader capability to make business loans than thrifts do. And most banks are insured by the Federal Deposit Insurance Corp., which is in much better financial shape than FSLIC.
“I think the public sees the name ‘bank’ and doesn’t necessarily perceive the distinction,” Ballweg said.
Thrift industry spokesmen say no one is fooled. “I don’t think it adds much in the way of confusion,” says Steve Johnson, a spokesman for First Nationwide. “The difference between us and a bank is the ability to do large commercial transactions. Sophisticated customers who need commercial banking services know who they are talking to.”
Consumer advocate McEldowney, executive director of Consumer Action in San Francisco, doubted many consumers were confused by an institution’s name. “The thing for a consumer to look for is to make sure its federally insured,” he said, since deposits are protected up to $100,000. “If it’s insured, the name doesn’t make much difference.”
Often, consumers can tell the difference by looking for the discreet notices that say whether the institution’s deposits are insured by the FDIC (bank) or FSLIC (thrift).
