May 8, 2008
Bankers Say Down Economy Could Benefit Worcester
By Matthew L. Brown
Albert Brown
Panelists Charlie Valade, president and CEO of Commonwealth National Bank , Paula Mello, vice president of real estate at TD Banknorth , Albert Brown, executive vice president of Sovereign Business Capital and Matt Durkee, regional senior vice president of People's United agreed that tough times for their customers mean tough times for their banks.
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But all is not lost, Valade said. "New England has learned from the '90s moreso than other parts of the country," he said. "We have some customers who have never had better years," and others that are truly "in the mud," as Mello put it.
The difference is in how those companies are managed, Valade said. "Management that had some foresight a few years ago and spent money to become competitive" will weather the down economy better than companies that "weren't paying attention to tomorrow. Most companies can make money in good times." Only well-managed companies "can make money and sustain growth in difficult times."
However, the banking industry is finding it difficult to sustain growth. Construction is down and the development of "anything that is residential for sale or a condo is highly questionable," Mello said.
The retail sector is also having a difficult time, and commercial banks are "being more selective," Brown said. They're offering less aggressive credit structures and are willing to "tolerate less leverage."
"The driver is the banks need to raise capital," Brown said. A common way for banks to do that is to "slow down growth, and your capital rate becomes higher as a result. All banks, very different size banks, are all reacting the same, they're suffering from the same issues," he said.
What troubles Durkee is the fact that "delinquencies are starting to come up on our customers' receivables. They're going to end up with a problem relatively quickly."
"Banks still need to lend money to make money," Durkee said, "we're just going to be a little more prudent about it."
Mello said businesses that see hard times ahead must ask for help well before they're "in the mud." Brown said businesses must also remain open to the advice they get from their banks or management consultants.
The panel agreed that the University of Massachusetts Medical Center's growing profile as well as the affordability of real estate in the Worcester area could attract companies to the area the same way companies were attracted to Cambridge decades ago. They said businesses could flock to the area to be close to UMass and also Bristol-Myers Squibb, which is building a massive complex in Devens.
The panel was held at the College of the Holy Cross and was sponsored by the Turnaround Management Association 's Northeast chapter, Worcerster law firm Mirick O'Connell , consulting firm Tatum and TD Banknorth. It was moderated by Paul Kelly, national director of business development for Sovereign Bank .
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