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Staying the course in a bankers' paradise

Incoming Florida SunTrust chief Tom Kuntz says the operation is running smoothly. The bank's market share is down, competition up - but so is profit.

By JEFF HARRINGTON
Published December 19, 2004

When Tom Kuntz takes over as president and CEO of SunTrust's Florida operation next month, don't hold your breath for a shake-up.

The way Kuntz sees it, his predecessor and longtime friend George Koehn has done such an admirable job running Florida's third-largest bank, his focus should be on staying the course and capitalizing on "the best banking market" in the country.

"Not everyone in the world gets to live in paradise," he says.

What some critics charge, and Kuntz steadfastly denies, is that of late there has been some trouble in paradise.

SunTrust fired its credit officer and two other employees at its corporate headquarters in Atlanta last month after accounting errors forced it to restate financial results and delayed its quarterly earnings release. Numerous top managers also have taken early retirement in recent months, leading some analysts to conclude chief executive L. Phillip Humann is disappointed and rejiggering his team.

In its pivotal Florida unit, meanwhile, SunTrust has lost ground to some of its old Southeast rivals while facing fierce, fresh competition from new-to-the-state players such as BB&T and Fifth Third Bancorp.

When SunTrust bought Huntington Bank's Florida operation in early 2002, there was an immediate jolt to its deposits. Its Florida market share jumped from 10.2 percent to nearly 12 percent, solidifying its No. 3 rank.

Two years later, however, the Huntington gains have evaporated and SunTrust's market share is back down to 10.2 percent, well behind No. 1 Bank of America at just more than 20 percent and Wachovia, now just less than 20 percent.

What happened at SunTrust depends on whom you ask.

Some think SunTrust hurt itself by some poor timing, zigging on its Florida business plan while its biggest competitors zagged.

In other words, SunTrust chose to centralize operations and maximize profits through higher fees at the same time arch-rivals Bank of America and Wachovia suddenly were emphasizing improved customer service and giving more control to local operations.

"They enforced (higher) fees. They enforced strict adherence to the rules. They did it when everyone else was doing just the opposite," said Dick Bove, a banking analyst in St. Petersburg who works for Punk Ziegel & Co. "The net effect is they just lost customers."

Kuntz disputes that theory. For one, he doesn't accept the notion that SunTrust fees are necessarily higher. Some might be higher; some lower, he said.

Kuntz refuses to discuss state market share, saying it is not one of the benchmarks he uses. He declined to release figures from those internal benchmarks - such as number of households and penetration of certain banking products - but he said they show SunTrust has done "really, really well."

Bank spokeswoman Susie Findell added that she views market share comparisons as "misleading," because of accounting changes over the last few years. Revenue in Florida from mortgages, real estate financing and commercial investment banking, for instance, are now accounted for in SunTrust's Atlanta headquarters. (She acknowledges other out-of-state banks might be in the same situation, however.)

Kuntz and other SunTrust executives also downplayed the rash of recent early retirements inside the bank. Vice chairmen John W. Clay Jr. and Theodore J. Hoepner were the latest to announce plans to leave.

The bank said the departures are unrelated to internal problems but Bove, for one, isn't convinced.

"Either this is the most massive coincidence of early retirements known to mankind or what I said is correct," he said. "SunTrust is cleaning its deck to make way for a new management team because the old management team lost market share and didn't participate in the retail rally."

The spotlight on SunTrust makes it an interesting time for a changing-of-the-guard in Florida.

At 48, Kuntz has spent his entire banking career at SunTrust, starting as a management trainee in the former SunBank in Orlando in 1978. At one point, he worked in the international division overseeing the bank's activities in Europe.

Kuntz spent six years in Tampa, beginning in 1993 as a senior executive vice president overseeing the bank's branches, all lending and private banking. Two years later, he became president and chief operating officer of the Tampa bank. Since 1998, he has been stationed in South Florida, most recently acting as CEO of the region. If there are two values that shine through in talking with Kuntz, they are family and loyalty. He talks fondly of his recently departed father, Bill, who helped inspire his love of golf, among other sports. His dad, he notes, not only played in the U.S. Open in 1956 but posted a rare hole-in-one during the tournament.

He met his wife, Carol, the first week of freshman year at Rollins College in Winter Park, and dated her throughout college. They married after graduation. They have a 23-year-old son, Jeff, who is in law school in Boston, and twin 21-year-old daughters, Megan and Missy, in college in Dallas.

"Not a day in my life I don't talk to all three of my children," Kuntz said.

Steadfast loyalty also is apparent when it comes to work. After working with Koehn for 25 years, Kuntz has nothing but praise and admiration for his boss.

"I want us to sustain the positive momentum George has put in place," he said.

Toward that end, he intends to continue expansions in south and central Florida (SunTrust opened 12 branches statewide this year) and nurture a new relationship with in-store branches at Wal-Mart.

The SunTrust/Wal-Mart relationship hinges on SunTrust's acquisition this year of National Commerce Financial, a $23-billion Memphis institution best-known as an innovator in grocery store banking.

Just before the merger was announced, National Commerce signed a deal to put 70 branches inside Wal-Mart stores throughout the Southeast, including more than 50 in Florida. This year, SunTrust/National Commerce has opened six Wal-Mart store banks in Florida, three in the central region and three in the southwest.

Several banking observers said they have no doubt SunTrust will rebound quickly from the financial restatement, which triggered an investigation by the Securities and Exchange Commission. Several analysts said most customers wouldn't know or care about such accounting miscues, particularly since it will likely result in a $31-million increase in earnings for the first half of the year.

"SunTrust made a mistake. They admitted to it. They came out with their own review to not only find the mistake but correct it," bank analyst Christopher Marinac of Fig Partners LLC said. "It's a demerit but it's not an indictment."

Marinac also said SunTrust could recover from its "slight market slippage" in Florida, but it might not be easy.

"The key is whether SunTrust can still be effective at the local level like it has been in years past," he said. "It's a ground war every day. The big banks have to see it as such."

SunTrust's slippage in the ground war appeared directly tied to its move to increase fees and, therefore, profits, according to Bove. Most recently, the bank reported third-quarter net income climbed to $368.8-million, or $1.30 a share, from $331.6-million, or $1.19 a share, a year ago.

SunTrust used to be held up as a model for doling out autonomy to local offices. Each metro area banking operation operated under its own charter with its own president, local advisory board and an acknowledged degree of autonomy with local decision-making.

It switched to a single charter based in Georgia in 1999.

For years, SunTrust had argued that its unusual, decentralized system of local charters helped keep dollars-and-cents decisionmaking in local hands. But when it consolidated its 26 regional charters into one, SunTrust executives insisted the change would be invisible to most customers and have no affect on operations.

Kuntz believes that has proven true.

The single charter means there is a consistency with the products offered in all branches, but every market can customize products based on local needs, he said.

"A change in the charter has nothing to do with organizational issues. That was more of a legal issue," he said. "In my (previous) role as president and CEO of South Florida, I felt absolutely empowered to do what (was) necessary to serve my customers."

As an example, Kuntz cited the reaction to this year's hurricanes. In his South Florida post, he decided to waive ATM fees for customers and noncustomers using the machines before and after the storms struck.

"We made the decision locally," he said.

Times staff writer Tamara El-Khoury contributed to this report. Jeff Harrington can be reached at 813 226-3407 or harrington@sptimes.com

CEO: L. Phillip Humann

Headquarters: Atlanta

Exchange: NYSE

Ticker symbol: STI

Stock 52-week range: $61.27 to $76.65 Friday close: $72.78

Assets* : $128.1-billion

Deposits* : $85.5-billion, including $30.7-billion in Florida.

Florida operation: 9,700 employees with 431 branches and 910 ATMs.

* As of June, 2004.

[Last modified December 19, 2004, 00:15:16]