FTSE Global Equity Index Series

that specialises in financial companies.“But they have not
implemented the other 65.”
So, even when competitors borrow an idea, they do not
necessarily pull it off with the same élan. It is one thing,
for example, to install machines in branches that quickly
count huge quantities of unsorted coins. Commerce’s
machines look like arcade games, with sounds and
flashing lights. And just to make it amusing, Commerce
invites visitors to try to guess how much all their coins
are worth. If they are close, the bank gives them token
prizes, such as a plastic piggy-bank “C” in Commerce’s
trademark red.
But that is not all. Wendel discovered when he took his
young son and a huge jar full of coins to a Commerce
branch, intending to have some fun counting the money.
The coin counting machine was broken the day they
visited, but the branch manager was not about to let the
youngster go home disappointed, Wendel said. Without
missing a beat, the manager called another branch, to
make sure its machine was in working order, and then gave
Wendel money to cover a taxi ride to the other office.“That
was an amazing customer experience,”Wendel says.
Competitors might dispute Hill’s assertion that he is the
only one pursuing revenue growth. They would be hard
pressed to argue, however, that Commerce does not spend
generously, on items large and small, in that pursuit. For
example, Commerce only takes the best locations when it
opens new branches, says Jacqueline Reeves, a bank stock
analyst with Ryan, Beck & Co., a New Jersey-based
brokerage firm, even though it invariably pays more for
them than other sites around town. One such site gives Hill
a chance to chuckle occasionally at Chase’s expense. A
photograph in Commerce’s standard analyst presentation
shows a building at the corner of Fifth Avenue and 14th
Street in New York. Commerce signs adorn the windows on
the first floor, immediately below Chase signs. Chase, Hill
explained, gave up its lease on the first floor, presumably to
cut its sky-high Manhattan occupancy costs, and held onto
space it had on the second floor. Commerce moved into the
first-floor space, which is more accessible to customers and
prospective customers walking by. The Commerce branch
ASSET QUALITY
Non- Performing
Assets
Charge-offs
Loan Loss Reserve
12/01 12/02 12/03
.17% .11% .11% .11%
.19% .18% .16% .19%
1.46% 1.56% 1.51% 1.43%
Non-Performing
Loan Coverage 398% 640% 515% 413%
Credit Rating: A-2/P-1
FTSE GLOBAL MARKETS • JULY/AUGUST 2005
12/04
Top 60
Banks
0.60%
0.537%
1.52%
278%
has $59m in deposits, more than thousands of bank
branches around the US that have been open for many
years longer than Commerce has been in New York.
At the more modest end of the spectrum, where other
banks tether a pen to a counter for customers to prepare
routine forms, Commerce fills boxes with dozens and
dozens of writing implements. Hill says the bank gives
away 1m pens a month and would be happy to push that
figure to 2m.“The average bank would say,‘How do we get
our pen costs down,’”he says. Only time will tell how long
Commerce’s high-cost approach to business can generate
outsized earnings growth. Unless the model falters badly,
however, it is unlikely that big banks will take Commerce
for granted again.
The Citis and Chases and Banks of America of this world
regularly boast that their vast branch systems and even
vaster networks of automated teller machines give
unparalleled access to their customers’ accounts. But
Commerce, which calls itself “America’s Most Convenient
Bank”, appears to have neutralised that big-bank
advantage and given clear meaning to what could easily be
an empty slogan with a new costly program recently. The
bank announced in March a wide-scale program to rebate
automated teller machine fees that machine owners and
other financial institutions charge its customers. It said it
would cover the cost of using all machines, worldwide, for
customers who have $2,500 in their checking accounts.
Clever slogans are not necessarily hard to come by. But
it certainly difficult for competitors to argue that cost-free
access to customer accounts around the world is not
pretty convenient.
2004 SUMMARY
Total Assets
Total Deposits
Total (Net) Loans
Total Revenues
Total Expenses
Net Income
Net Income Per Share
$30.5B
27.7B
9.3B
+34%
+34%
+27%
$1,392.9M +28%
938.8M +23%
273.4M +41%
$1.63 +26%
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