CT customers consider moving accounts from People's United Bank because of merger

Photo of Luther Turmelle

It has been about one month since People’s United Bank announced it is being acquired in a $7.6 billion deal with upstate New York-based M&T Bank, and already some customers of the Bridgeport-based financial institution say they are considering taking their accounts elsewhere.

Some grumbling from customers is expected when a bank is acquired by a larger institution. But news of the Feb. 22 transaction also came on the heels of People’s decision to end its relationship with grocery giant Stop & Shop.

“I thought I would leave when that happened, but now I’m definitely going to a credit union,” said Cheshire resident Ruth Harlow.

For more than two decades, People’s United has operated branches in many Stop & Shop locations around Connecticut. The supermarket branch closures won’t begin until 2022, but People’s United customers are bemoaning the loss of a convenient way to do their banking.

“I have been thinking of moving away from them for some time now,” said Greg Colonese of Wallingford. “If they continue to restructure and close branches, I’m out. It’s all about money and what their bottom line is. Customers seem to come second or third in a lot of places now.”

John Rosen, an economics professor at the University of New Haven, said the normal rate of customers leaving a bank that’s being acquired — known in the industry as “churn” — is about 8 percent of its total customer base.

“That number is not trivial,” Rosen said. “But individuals talk a good game, and having to take the time to fill out forms and get new ATM cards is inconvenient.”

Carl Casper, executive vice president and chief operating officer of North Haven-based Connex Credit Union, said People’s United customers have already contacted his staff about switching their accounts.

“It’s not in the hundreds, but I’d say we’ve fielded several dozen inquiries,” Casper said.

When making the decision to switch banks, Casper said consumers must weigh the decision carefully. “It really depends on how the bank that is doing the acquiring handles the conversion,” he said. “If they do it well, then fewer people switch to another bank. But if it is done poorly and account numbers are lost, it’s a different story.”

Consumers must weigh the risks of getting lost in the shuffle against the inconvenience of switching to a new bank. “It’s a lot easier than people probably think,” Casper said. “It is not without some friction, but it’s a lot easier than it used to be.”

When bank mergers occur, Casper added, merger partners always insist that the conversion will be seamless. “Banks always come in with that attitude,” he said. “But when the dust settles, they’re going to do what they want.”

Supermarket branches represent roughly 50 percent of People’s total presence in Connecticut, according to John Carusone, president of the Bank Analysis Center Inc., a Hartford-based industry consultant.

Carusone said the People’s United-M&T Bank merger may have negative implications for Connecticut’s economy as a whole.

“Most important decisions at a bank are made where the boss’ chair is, which in this case is in Buffalo, not Bridgeport,” Carusone said. “Connecticut is losing its largest institution. When a merger occurs, the bank that is being acquired no longer controls its own destiny.”

People’s United is Connecticut’s largest homegrown bank, with a 15.2 percent market share and 172 in-state branches, according to 2019 data from the Federal Deposit Insurance Corporation.

Carusone also said People’s United shareholders were short-changed by the terms of the merger. “The price was adequate, but only adequate, not what one would expect for one of the premier retail banking franchises in New England,” he said. “The entire [merger] package looks a little thin for what might have been expected for a bank like People’s United. It wouldn’t surprise me if some shareholder lawsuits didn’t come out of this.”

Rosen, the economics professor, said a lawsuit over the terms of the People’s United-M&T Bank merger is “certainly a possibility.”

“It happens every now and then,” Rosen said. “But stopping the freight train after it has left the station is kind of hard.”

Carusone said one factor that makes legal challenges a distinct possibility in this case is that 72 percent of People’s United shares are owned by institutions.

“Those people like to get paid,” he said. “These terms are likely to be viewed as acceptable, but certainly lackluster.”

People’s United has been involved in several mergers that resulted in shareholder lawsuits.

In 2017, Long Island-based Suffolk Bancorp had to seek a settlement with a shareholder before a merger with People’s United could proceed.

And in 2019, when People’s United acquired First Connecticut Bancorp Inc., it faced a class action lawsuit by shareholders of the corporate parent of Farmington Bank before the deal ultimately went through.

This time, if no shareholder lawsuits materialize, Carusone said another possibility is that a rival bank could counter M&T Bank’s offer with a better deal for People’s United shareholders.

Rosen said he thinks the People’s United board of directors probably made the best deal they could at the time. “They must have a reason they didn’t think they could get a better deal.” he said. “I’d be surprised if they were wrong.”

Officials with People’s United and M&T Bank did not respond to requests for comment on the terms of the merger agreement.

Another impact the proposed People’s United-M&T Bank merger could have on Connecticut’s banking landscape is the proliferation of additional mergers, according to Rosen and Carusone.

After People’s United, the largest bank with a headquarters in Connecticut is Waterbury-based Webster Bank.

“I’m sure they are having lots of analysis done of whether they need to tie up with somebody big,” Rosen said. “The reason banks merge is to build a more efficient operation.”

Carusone said the proposed merger “does put pressure on Webster’s board to make certain it is generating long-term value to shareholders at a level which is higher than what comparable takeover terms for People’s or similar institutions are being offered.”

Kelly Raskauskas, a Webster Bank spokesperson, said her bank’s primary focus remains on “our overall performance, organic growth and our transformational project discussed at our last earnings call.”

On that call with industry analysts, John Ciulla, the bank’s chief executive officer and chairman, discussed Webster’s growth strategy. Ciulla said the bank’s focus is exploiting its expertise in certain market segments like Health Savings Accounts.

“If there were a really, really compelling opportunity in HSA or from a whole bank perspective that had great strategic and financial merits to it, obviously, we would look at it,” Ciulla said. “But I will tell you that this bank right now... is completely focused internally at making sure that we drive value, that we take care of our customers and take care of our own business.”

Ciulla said Webster is also “investing in revenue growth drivers that leverage our differentiated businesses.”

“These include accelerating growth in new and existing commercial banking segments, improving sales productivity, enhancing non-interest income through treasury and commercial card products and driving deeper relationships across all lines of business,” he said. “Additionally, we continue to invest in technology to provide better digital experiences for our customers and bankers to further improve customer acquisition and retention rates.”

luther.turmelle@hearstmediact.com