Professor Michelle Roehm Comments on Wachovia/Wells Fargo Corporate Name Change

5.16.2011 Article, Faculty News, General

Counting down: Wells Fargo logo likely to replace Wachovia's in N.C. in October

Reposted from Winston-Salem Journal | by Richard Craver

The countdown is under way toward perhaps the most symbolic corporate name change in Triad history.

In just a few months, the Wachovia brand will fade into history in North Carolina after 132 years.

Wells Fargo & Co. said in a statement timed for release today that it plans to convert the 317 Wachovia branches in the state to the Wells Fargo name in mid-October. It said it hasn't set the exact date yet.

After the conversion, Wells Fargo's red and yellow color scheme will take the place of Wachovia blue and First Union green — a combination, like the controversial 2001 Wachovia-First Union merger, that never sat well with many legacy Wachovia employees and customers.

"We take great pride in the fact that North Carolina, Wachovia's home state, will provide the exclamation point to this merger, and the thorough, thoughtful and respectful process we followed," said Stanhope Kelly, the bank's regional president for Carolinas Community Banking.

However, officials also are aware that the Wachovia brand going away "could be seen as a loss" in North Carolina, said Leslie Hayes, the regional president of the Triad West community banking unit for Wells Fargo.

The bank said it will pay homage to the Wachovia legacy by having murals depicting the bank's history painted inside branches. Those in Forsyth County branches will feature its Winston-Salem heritage.

"It will be an emotional time to see Wachovia's name removed from buildings in the city," said Allen Joines, the mayor of Winston-Salem.

"But the name Wachovia will live on in the hearts and minds of our citizens as we remember the legacy of this great company. We are very appreciative of Wells Fargo's commitment to our community in maintaining and in fact expanding the work force here."

Branch conversions will take place in Virginia in August, and Maryland, South Carolina and the District of Columbia in September. Branches in the three states and the nation's capital already operate with Wells Fargo's ATM systems.

Customers will keep their same account numbers, but they will have to use Wells Fargo deposit slips.

The decision to save North Carolina for last is the final step of a deliberately methodical strategy that began in October 2008 when Wells Fargo emerged victorious over Citigroup in taking over a collapsing Wachovia.

Analysts expect the branch and software conversions to go smoothly considering that Wells Fargo will have done nine other banking markets by then, and there is very little overlap between the banks in North Carolina.

There was much more anxiety, by comparison, when First Union Corp. conducted its conversion of Wachovia branches in the Carolinas in May 2003, which was one of the largest conversions in U.S. banking history. It also was considered one of the riskiest given the significant amount of market overlap and First Union's reputation as a poor merger manager.

"The Wachovia name obviously has strong equity and deep roots with customers," said Michelle Roehm, a marketing professor and a senior associate dean of faculty at the Schools of Business at Wake Forest University. If Wells Fargo had proceeded more quickly, it "would, I believe, have shocked the system and created undue anxiety.

"However, the gradual transition has been a real asset, with markers such as the recent Wells Fargo PGA tournament as reminders to consumers that the change is coming."

Hayes said the bank has had smooth conversions to date in part because of employee training and tweaking the strategy where necessary.

"We have addressed what most concerns customers about conversion," Hayes said. "The same people they are used to see will still be there, and they will gain the benefit of the breadth and strength of Wells Fargo's services."

The primary goal of the strategy is limiting customer run-off, which typically occurs at some level in all bank mergers, analysts said.

Analysts say large banks are most vulnerable to customer losses at two points during a merger: during the initial announcement and then during the actual branch conversion. Even a temporary glitch on account availability might be enough to persuade customers to take their business elsewhere.

Wachovia experienced at least $1 billion of deposit run-off in the weeks before and after the Wells Fargo takeover, with BB&T Corp. benefiting the most in North Carolina.

"The prolonged duration of the Wells Fargo conversion process has defused a lot of the emotion and tension that would otherwise have occurred in the North Carolina market," said Tony Plath, a finance professor at UNC Charlotte.

Plath said the customer run-off is not likely to exceed 2 percent as compared with 5 percent in most large bank mergers.

"Those substantial customers who were upset with Wachovia's demise and Wells Fargo's ascendancy in the Carolinas have already left," Plath said. "Those good customers that remain are, for the most part, happy with Wells Fargo."

Although Wells Fargo officials understand the comparisons to the First Union-Wachovia merger, they said there are significant differences between transitions.

In the First Union merger, about 1,300 local Wachovia jobs were eliminated, as well as nine branches in the Triad. The bank's headquarters moved to Charlotte.

Wells Fargo, by contrast, has said it will keep all the Triad branches and expand its Triad work force by 150 jobs by the time the North Carolina conversion is completed. The bulk of those would be in wealth management, trust and branches.

Josh Dunn, a Wells Fargo spokesman, said the bank has created 110 jobs in Forsyth County since it took over Wachovia. He said the work force in its Triad West market — which is comprised of 26 counties, including Forsyth and other Northwest North Carolina counties — was at 4,176 on March 31.

Given Wells Fargo's overall strength in the financial crisis, the bank continues to appear in hindsight more as a white knight for Wachovia than First Union, which kept the Wachovia name because the First Union brand had been sullied.

Chris Marinac, the managing partner of FIG Partners LLC in Atlanta, said he doesn't expect any hiccups with the conversion.

"Branch conversions have become a science, and the mistakes of the 1990s are hard to repeat," Marinac said. "The banking industry has come a long way from the Future Bank initiative at First Union. I highly doubt Wells has any problems here."