Charlotte has long prided itself on being the nation’s second-largest banking center, but those are bragging rights the Queen City will have to give up.
San Francisco now exceeds Charlotte in the value of loans and other assets held by banks headquartered in the respective cities, according to an analysis for the Observer by S&P Global Market Intelligence. For Charlotte, it means saying good-bye to a title it has held – and built a big part of its identity around – since 1990s acquisitions by swashbuckling bankers Ed Crutchfield and Hugh McColl Jr.
Charlotte’s $2.26 trillion in assets place it $13 billion behind San Francisco’s figure, dropping Charlotte to a close third place. New York, home to Wall Street, retains its firm grip on its decades-long first place spot, with $8.45 trillion in assets.
Certainly, Charlotte still employs tens of thousands in the financial services industry, and such companies continue to relocate and expand in the region. “In the grand scheme of things, Charlotte is still a bank center. Charlotte is still a magnet for bankers,” said Tony Plath, finance professor at UNC Charlotte. The impact of losing the No. 2 ranking, he said, is “all psychological.”
In addition, city leaders have sought to broaden Charlotte’s identity beyond that of a banking center, saying that image no longer fully reflects the diversity of the city’s economy.
Even after Wells Fargo snapped up Charlotte’s Wachovia in 2008, Charlotte held onto its title of No. 2 banking center by assets. But since then, San Francisco has been closing the gap.
S&P did not have historical data to show when San Francisco overtook Charlotte, but here are some key factors:
▪ At the end of 2008, San Francisco-based Wells Fargo had $1.3 trillion in assets, including Charlotte’s Wachovia. Since then, Wells’ assets have climbed another $600 billion, or nearly 50 percent. Since just the end of 2015, Wells has added $144 billion in assets, including purchases of General Electric business lines.
▪ Around the end of 2008, Charlotte-based Bank of America had close to $2.7 trillion in assets if you counted mortgage lender Countrywide Financial, which it bought in June of that year, and Merrill Lynch, the investment bank it officially bought on Jan. 1, 2009. But the company soon began shedding bad assets from those deals and selling off non-core businesses in an effort to streamline the company and build capital. At the end of March 2017, it had about $2.25 trillion in assets, which was up 3 percent from a year ago as the bank bolstered its loan portfolio.
▪ Among the businesses that Bank of America shed was First Republic Bank, which had been part of Merrill Lynch when the Charlotte bank acquired the brokerage. It sold the private bank and wealth management firm in 2010 to a group of investors and its $76 billion in assets are now based in San Francisco.
▪ Brokerage firm Charles Schwab, to which San Francisco lays claim, has seen the assets on its balance sheet jump to $227 billion from $51 billion in 2008.
Charlotte began boasting about moving ahead of San Francisco to become the No. 2 banking center by assets as early as 1995, although there was some dispute over the math. But by 1997, the Observer reported that Charlotte had moved far ahead of San Francisco thanks to big deals by NationsBank, the Bank of America predecessor led by McColl, and First Union, the Wachovia predecessor led by Crutchfield.
At the time the Observer reported that Charlotte had $488.8 billion in total assets headquartered in the city versus $415.3 billion for San Francisco.
“I’m gonna go call (San Francisco Mayor) Willie Brown right now, especially since we lost to the 49ers this year,” then-Charlotte Mayor Pat McCrory said at the time. “I’ve got to have bragging rights to something.”
‘Turnabout’s fair play’
For years, Charlotte boosters have used the city’s No. 2 designation to promote the region. Business and organizations ranging from real estate firms to the Charlotte Regional Partnership still tout the label on their websites. Even Charlotte’s Wikipedia entry includes its second-place status.
More recently, Charlotte’s leaders have examined how Charlotte might rebrand itself beyond a financial services hub, in light of growth across other sectors of its economy. For example, during a 2015 Charlotte Chamber of Commerce trip to learn about Nashville, Tenn.’s “Music City” brand, members of Charlotte’s business community weighed a variety of new branding options, including health care and NASCAR.
Despite losing its title, Charlotte still has more jobs in the finance and insurance sector than it did before the recession. Last year, the sector employed 64,288 on average in the metropolitan area, compared with 59,236 in 2007, according to federal data.
In a statement, the Charlotte Chamber noted the financial sector “remains a crucial part of the Charlotte economy,” adding that the industry is “healthy and growing.”
Ronnie Bryant, CEO of the Charlotte Regional Partnership, a public-private economic development organization, said he doesn’t think Charlotte’s loss of its No. 2. title will make it harder to attract companies to the region – “not at all.”
His organization has never exclusively focused on banking when selling Charlotte, he said, pointing to energy and logistics as among other important sectors.
“We’ve always marketed this region as a very diverse economy, with banking being very prominent, without a doubt,” Bryant said.
It’s possible Charlotte will one day grab the title back from San Francisco. But some upcoming deals won’t help with that.
Charlotte is set to lose the headquarters of two banks, Park Sterling and Capital Bank, later this year, costing the region about another $13 billion in assets. Following those deals, Charlotte will be base to only three banks: Bank of America, NewDominion Bank and Carolina Premier Bank.
“The concentration of bank talent in this town is still a major draw for major financial services companies,” UNC Charlotte’s Plath said. “They just don’t move their headquarters here.”
“Strategic decisions about managing these franchises aren’t made here,” Plath added. “They’re made somewhere else. And that’s a loss.”
At the San Francisco Chamber of Commerce, officials were pleased to be told the city had regained its long-lost title.
“You stole ours, so turnabout’s fair play,” Jim Lazarus, senior vice president of public policy for the chamber, told the Observer. San Francisco hasn’t forgotten that it lost BankAmerica when Charlotte’s NationsBank acquired it in 1998, he said.
“I’ll let my economic development staff know they need to post something on their website and crow about this,” he said.