Banks tread gingerly with the 'T' word
For the other banks in town, it would seem the perfect marketing pitch: Trust us.
FleetBoston Financial Corp. and its North Carolina suitor, Bank of America Corp., have been engulfed in a mutual fund scandal that has tarnished their reputations and forced them to pay a hefty $675 million penalty. Although Fleet's New England rivals will offer free checking and airplane tickets to woo customers, they draw the line at advertising themselves as the straight and narrow alternative.
''It's a little like the restaurant owner advertising that with every meal, he'll provide clean utensils," said Dick Ehst, managing director of corporate communications at Sovereign Bancorp. ''With Sovereign, it's really a statement of the obvious."
Citizens Financial Group said it's hard to convey honesty in an ad. ''Trust is an important element between a bank and its customers, but it's something that you build," said Melodie Jackson, a Citizens spokeswoman. ''Citizens has a longstanding reputation for operating with the highest ethical standards. That's not something you achieve by running an ad."
But other specialists say the banks have good reason to be mum: It's too easy to get caught up in their own scandal later.
''It would be a pretty foolhardy strategy," said Kathleen Seiders, an associate professor of marketing at Boston College. ''Just imagine how that could come back if that institution started to be investigated. That can happen."
With or without advertising, some Fleet customers are questioning whether they can trust the bank and its merging partner, Bank of America. The two are scheduled to legally combine on April 2. Shareholders of both banks are expected to approve the merger today.
R.A. Wetherbee of Quincy, a construction company owner, said he is reassessing whether to keep about $750,000 in mutual funds he bought through Fleet. Though he has no money invested in the Fleet mutual funds arm included in the settlement, Wetherbee said the entire scandal still makes him uneasy.
''I'm considering pulling all my money out right now," he said on his way to visit a Fleet branch in Quincy. ''I'll remove what's not protected."
Other customers also lambasted the bank, saying Fleet downplayed its mutual fund problem to win a public relations victory. Fleet had insisted its mutual fund investigation was relatively small -- largely three investors in three funds. The bank even set aside $25 million to cover the regulatory fallout. But when regulators said they found improper trading in 17 funds, Fleet agreed to pay $140 million -- more than five times that amount.
''It's just sickening that they're doing this stuff, it really is," said Michael Fleming, a car salesman from Marblehead who says he plans to transfer his account from Fleet this week. ''Fleet's reputation is going down the tubes."
But the blows to Fleet and Bank of America may also shake consumer confidence in other New England banks. Several people interviewed yesterday said Fleet's mutual fund settlement bolstered their belief that all large banks conceal the truth.
''I wouldn't care if any of the banks told me they're honest, or if they said they lied," said Ernie Penachio, 27, a biotech engineer who banks with Citizens. ''I know they all spin that information, anyway."
Beyond the troubles with Fleet, Americans' trust in financial institutions is low, according to a November poll by Harris Interactive, a market research and consulting firm. Only about one-third of respondents believe Wall Street executives are as honest and moral as other people, down from 39 percent in 1999, the poll found.
Fleet did not return phone calls for comment yesterday. Bank of America released a statement saying it did not plan on any ads to defend its reputation. ''Our business is built on trust, and we will always do everything we can to earn our customers' confidence," spokesman Scott Scredon said in an e-mail.
Sasha Talcott can be reached at stalcott@globe.com
