Always Aggressive, Always Wal-Mart: What Makes Wal-Mart Keep Coming Back and Back to Financial Services? and Is "Wal-Mart Paranoia" Psychosomatic or Justifiable? (Cover Story)

Dan Stevens was flabbergasted. Stevens is chairman, president, and CEO of Home Federal Savings, a $435 million-assets thrift based in Nampa, Idaho, that has made aggressive use of Wal-Mart branches. Starting about two years ago, Home Federal opened the first four of nine locations in Wal-Marts. opportunities didn't just drop into the bank's lap. For most locations, Home Federal had to bid both by lease payment and up-front key money against as many as eight other organizations to obtain some of these in-store sites. In exchange for the money, and the investment in facilities, the savings institution obtained the standard Wal-Mart 15-year bank branch lease. The payoff? Mixed to date, says Stevens. The stores have provided the traffic that Home Federal was hoping for, but only two of its Wal-Mart locations are near breakeven after two years. Some have a ways to go yet, and some have been closed because Home Federal found it just couldn't crack the local market with only an in-store branch that was permitted minimal outdoor signage by landlord Wal-Mart. But none of that accounts for why Stevens was flabbergasted. What does is this. Stevens learned, a few weeks before being interviewed for this article, that Wal-Mart bought too much land when it built several of the Wal-Mart Supercenters in which Home Federal leases branches. To cut costs, Wal-Mart sold the land to Washington Mutual, which plans to open three full-service branches on these properties. Stevens, envisioning his nearly invisible, limited-service in-store branches going up against full-scale WAMUs, acknowledges that there was no promise that they wouldn't do that kind of thing. Yet, he says ruefully, thought we were partners with them. Watch that handshake Partnership is an uneven quality with Wal-Mart, going by the experiences of the handful of Wal-Mart bankers interviewed. Corporately, Wal-Mart appears to have had little to do with its bank tenants other than taking their money. Their focus has been to ensure that financial services are available to their customers, says John Nicola, senior vice-president, sales, for IBT, an in-store banking consultancy based in Norcross, Ga. Initially, the leasing arrangements were Wal-Mart's reaction to customer research indicating the desire for in-store financial services as part of the retailer's one-stop shopping appeal, Nicola says. These don't grow into the size of traditional branches, and any banker who thinks otherwise is kidding himself, says Gary Dorris, president and CEO of $1.4 billion-assets First National Bank Holding Co., Scottsdale, Ariz. First National has 20 Wal-Mart branches in Arizona and Nevada, and Dorris says the degree of cooperation and interaction varies store by store. On the other hand, Ron Heaton, president and CEO of State Bank of Southern Utah, a $316 million-assets bank with three Wal-Mart branches is more satisfied. He has even been able to bring in loaner vehicles from local dealers to place near his Wal-Mart branches when promoting auto loans (see photo, previous page). There have been signs, however, for all Wal-Mart tenant banks to see, that the relationship with Wal-Mart headquarters in Bentonville, Ark., only went so far. In September 2001--a date of demarcation among bankers operating the 908 leased branches located in Wal-Marts--a letter went out to all of them describing, in general terms, Wal-Mart's intention to bring banking services to more of its branches in partnership with an unnamed financial institution. As always, Wal-Mart remains committed to the existing relationships and agreements with our bank tenants, the confidential letter stated. We value the services you provide to our customers. The arrangement hinted at in the letter turned out to be a deal with Toronto-Dominion Bank's U.S. operation--subsequently shot down by the regulators. …

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