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JPMorgan Chase 'playing catch-up' with North Carolina expansion plan

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JPMorgan Chase 'playing catch-up' with North Carolina expansion plan

The largest bank in the country is launching into the North Carolina market, but experts say it will be playing catch-up.

JPMorgan Chase & Co. opened its first branch in the state on Aug. 7 and plans to add 39 more branches and 80 ATMs over the next three years. That will expand JPMorgan's retail and business banking presence and heat up competition in the already crowded North Carolina market.

Large banks already dominate the regions JPMorgan intends to focus on: Charlotte and the "research triangle" area of Chapel Hill, Durham and Raleigh.

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The combined BB&T Corp. and SunTrust Banks Inc. entity, set to be named Truist, holds almost 25% of the deposit market share in North Carolina. Truist, Wells Fargo & Co. and Bank of America Corp. hold a combined 54.52% of total deposit market share in the state. For this S&P Global Market Intelligence analysis, the market share data uses a $1 billion cap on per-branch deposits to smooth out the effect of the concentration of deposits often held at bank headquarters.

"What JPMorgan is doing now is an extension of its current presence by opening retail branches that will add a new competitive twist," said Peter Gwaltney, president and CEO of the North Carolina Banker's Association.

JPMorgan has had a commercial and private banking presence in the state for more than 10 years. Opening as many as 40 retail branches widens that strategy, but the expansion may be aimed less at gaining market share than at building a larger brand awareness that could bring in more business to all of JPMorgan's business lines, according to Janney Montgomery Scott LLC analyst Christopher Marinac.

"It’s a part of a big awareness effort that’s been long overdue in North Carolina," he said. "[JPMorgan] missed it for a long time, so they are playing catch-up."

The bank will have smaller institutions to contend with as well on the asset-gathering front. Carolinas-focused regional bank First Citizens BancShares Inc. has about 10% of the state's deposits and almost 250 branches. Southern Pines, N.C.-based First Bancorp, with $6.01 billion in assets as of June 30, has nearly 100 locations in the state.

JPMorgan's strategy in the state could involve getting "ultra-aggressive" with special rates on loans and deposits to compete with the big banks and community banks in North Carolina, Marinac said.

"Competition makes us better and benefits customers," a Wells Fargo spokesperson said in a statement regarding JPMorgan entering North Carolina. A spokesperson for BB&T pointed to Chairman and CEO Kelly King's comments during the bank's second quarter earnings call.

"We're not going to sit back and let our local competition take our business," King said when asked about competitors gaining market share.

JPMorgan is used to competing in new regions. The bank also recently launched in Washington, D.C., where it has opened 10 branches since October 2018.

Dan Schrider, president and CEO of Sandy Spring Bancorp Inc., which has three branches in Washington, said while the bank needs to have products and services to compete with JPMorgan, relationships are still its focus. "We have a clear identity as a community bank that is high-touch that has a high level of connection with our clients," he said.

That relationship counts when it comes to gaining and retaining customers, Marinac said.

"Being a big bank, it's still 1-800-JPMorgan, going through an online channel and not having the personal touch of someone who can actually explain how things work," the analyst said. "Community banks win in the long term because they are relationship-oriented."

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JPMorgan plans to focus a lot of its expansion on the Charlotte metropolitan statistical area, which is outpacing nationwide growth in banking. Despite the region's growth, 105 branches have closed and just 31 have opened in the Charlotte MSA since Jan. 1, 2013.

But JPMorgan faces an uphill climb in the area, with other large banks controlling more than half the deposits there just as they do statewide. Using a $1 billion cap at the branch level, BB&T and Suntrust, Wells Fargo and Bank of America hold 62% of total deposit market share in the Charlotte MSA. Bank of America is based in Charlotte and Truist will be headquartered there as well.

JPMorgan has not shied away from moving into high-competition areas. It currently has no branches in only four of the top 25 largest MSAs by deposits. And the bank has said it plans to open 90 branches in 2019, including expansions into Pittsburgh; St. Louis, Mo.; and Nashville, Tenn. Following those openings, JPMorgan will be absent in only one of the largest MSAs: Baltimore.

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