Bank Basks in Sunshine State’s Success
Steadily and without much fanfare, Barnett Banks Inc. of Florida has become one of the nation’s regional financial giants by capitalizing on the spectacular growth of the Sunshine State during the 1980s.
Top managers say they aim to have their bank holding company recognized in the next five years as a major player among financial institutions nationwide and that this would be accomplished through growth in the region.
Wall Street analysts worry that a slowdown in Florida’s economy may dim the luster on the state’s biggest bank, but company executives say such pessimism is unfounded.
“There’s concern over Florida real estate and a feeling about all of our southeastern competitors that there is a decline” in interest profit margins, Barnett Chairman Charles Rice, 53, said in a recent interview. “There are fears of a recession with real estate leading the way.
“We do not think that time has arrived. Our consumer statistics improved in the second quarter, and the general deterioration feared is not in evidence.”
Barnett’s income for the first half of 1989 rose 14% to $126.7 million, from $110.8 million for the period the year before--a robust performance by any measure.
Losses on Loans
Some analysts, however, said that the second-quarter performance was mildly disappointing because losses from loans on faltering real estate projects were higher than expected.
“Many of the worries on Florida real estate are a function of the fact that most bank analysts live in Northeastern areas suffering weakness in residential real estate,” said John Mason, a banking analyst for Interstate/Johnson Lane in Atlanta. Mason calls Barnett “an outstanding company.”
Barnett economist Mark Vitner recently wrote that drops in housing prices such as those in New England and other regions would not be likely in Florida because its housing prices rose much more slowly during the 1980s.
Rice said his company is bullish on markets in its home state and in a few in Georgia entered in 1986, and that it will concentrate its expansion in those areas for the foreseeable future. However, the company would consider extraordinary opportunities in other attractive markets, it said.
In fact, Rice characterized the goal to increase deposits by $15 billion over the next five years as conservative.
Changes Anticipated
Changes expected in the laws governing the troubled savings and loan industry--thrifts now have about 50% of Florida’s deposits--would give Barnett another means for expansion. The changes would allow banks to buy thrifts, whether healthy or failing.
“The whole playing field will change with rational competition in the future,” Rice said.
Barnett was recently ranked the 25th biggest bank holding company in the United States. It has assets of more than $27 billion and 553 offices in Florida and Georgia. It made more than 60 acquisitions over the past 18 years. It now has almost 23% of the bank deposits and nearly 12% of all financial deposits in Florida, the nation’s fourth most populous state. The company began with $35,000 in capital 12 years after the end of the Civil War.
The bank was battered during a recession in the state that ran from 1973 to 1975, but it rebounded with 13 consecutive years of higher profits.
Among the nation’s top 100 banks in income growth in the last decade, Barnett had the eighth best showing, according to a Fortune magazine ranking.
Only Statewide Bank
“We’ve done better than we had planned,” Rice said. “If you’d asked me five years ago where we’d be now, I’d say we are further along than we had expected.”
Key factors in Barnett’s expansion have been the increase in Florida’s population, an easing of laws limiting banks’ geographic expansion and the elimination of regulations that hindered banks in competing with thrifts and securities firms.
Despite the population growth and the legalization of interstate banking, which resulted in an invasion by other regional banks, Barnett is the only statewide banking firm.
