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How it affects customers: Citizens to be more 'retail-oriented'

Wednesday, July 18, 2001

By Pamela Gaynor, Post-Gazette Staff Writer

Mellon Financial Corp.'s decision to sell its retail banking business to a company whose owner still calls itself a bank should be good news for local Mellon customers.

"I think they will be better for the little guy," veteran banking analyst Arnold Danielson said of Citizens Financial Group, the U.S. arm of The Royal Bank of Scotland. "They will have a much more retail-oriented strategy" than Mellon has had, he said.

Mellon, in recent years, has been upping fees for customers with lower balances while creating special products, such as "Smart Accounts," that curb costs for those with higher balances. The strategy was to shift the bank's mix of clients toward those whose accounts provide greater profits and opportunities for selling other investment products, such as mutual funds and trust services.

Banks such as Citizens have gone the other way, trying to lure retail customers of all kinds. Citizens started out as a savings bank, geared toward the average passbook customer, Danielson said.

But whatever benefits Mellon customers may receive as a result of Citizens taking over Mellon's retail operations, the move will likely have little consequence right away. Not even the signs will change until this year's fourth quarter.

Whenever a sale occurs, consumer deposits remain in place unless consumers take them elsewhere, and the agreements under which existing loans were written remain intact, said Danielson, who is based in Rockville, Md. Within a year or two, if the new owner begins to change back office operations -- the computer-driven systems that banks use to keep track of accounts -- "a few mistakes will take place and make people mad," but that's about all a consumer has to be on the lookout for, he added.

Of course, as time goes on, the acquiring bank can overhaul the kinds of accounts it offers, whether choosing to provide free checking accounts at an institution that previously offered none or by lowering charges on a range of accounts geared toward smaller customers. Lawrence Fish, Citizens' chairman and chief executive officer, hinted as much yesterday. "We may have good news about fees," he told reporters at news conference unveiling his bank's purchase.

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