Charter One Shakes Up Operations at St. Paul Bancorp

Strategic Insights -

Charter One Financial Inc., the parent company of Cleveland-based bank Charter One, is rapidly transforming operations at St. Paul Bancorp, Chicago's largest independent thrift, following its acquisition on October 1. The company is discontinuing the St. Paul brand and overhauling the bank's management, loan sales, and operations. Anthony Sisto, a 44-year-old rising star and turnaround specialist, has been named interim president of St. Paul and is expected to replace Joseph Scully, who is no longer involved in daily operations. Sisto previously transformed FirstFed Michigan Corp., a $7-billion-assets thrift, into a profitable operation after Charter One purchased it in 1995.

Key Takeaways:

  • Charter One acquired St. Paul Bancorp on October 1 and is overhauling the bank's management, loan sales, and operations.
  • Anthony Sisto, a 44-year-old turnaround specialist, has been named interim president of St. Paul and is expected to replace Joseph Scully.
  • Sisto will attempt to transplant Charter One's aggressive sales culture and tight cost controls to St. Paul, which has been an underperformer.
  • Charter One plans to break even on its St. Paul purchase by the third quarter of 2000 by trimming expenses by a third and rolling out new checking accounts and home loans.
  • The company aims to become a top retail mortgage lender in the Chicago area within 12 months.
  • Charter One's aggressive marketing and consumer lending strategies have been successful in the past, with the company typically granting home equity lines of credit to mortgage customers.
  • The bank's operating expenses in FirstFed Michigan Corp. have decreased by 14% since 1995, and its consumer loans business has grown to over $1 billion.

Statistics:

  • $6.2 billion: Assets of St. Paul Bancorp ($31.7 billion)
  • $31.7 billion: Assets of Charter One
  • $7 billion: Assets of FirstFed Michigan Corp. (purchased by Charter One in 1995)
  • 58: Number of area branches for St. Paul Bancorp
  • $1.2 billion: Purchase price of St. Paul Bancorp by Charter One in stock
  • $29.13: Price per share of St. Paul Bancorp at the time of acquisition
  • 19%: Premium paid by Charter One over the thrift's share price
  • 2.98%: Net interest margin for St. Paul Bancorp in the second quarter of 1999
  • 3.15%: Net interest margin for St. Paul Bancorp in the year-earlier period
  • $27 million to $31 million: Expected cuts in expenses by mid-2000
  • 12 months: Timeframe for Charter One to become a top retail mortgage lender in the Chicago area

Sources:

  • Crain's, Dec. 14 and Oct. 5, 1998
  • Stifel Nicolaus & Co. in St. Louis
  • Keefe Managers Inc. in New York
  • U.S. Bancorp Piper Jaffray in Minneapolis
  • Household International Inc. in Prospect Heights, Illinois
  • Piper Jaffray conference (sponsored by the bank)