Monday, November 12, 2018
Business

SunTrust Tampa Bay president: Let’s play offense and go after the market

TAMPA — With his wife’s family in the Tampa Bay area and his own parents near Sarasota, Tim Schar was no stranger to the west coast of Florida even before January.

But visiting is one thing.

Running one of the region’s biggest banks is another.

That’s one takeaway Schar, 48, has from his first eight months as SunTrust Bank president for Tampa Bay and southwest Florida. With more than 5,500 employees across Florida and nearly $50 billion in deposits statewide, according to the most recent data available from the Federal Deposit Insurance Corp., SunTrust is the state’s third largest bank, behind Bank of America and Wells Fargo.

Schar replaced Allen Brinkman, who left SunTrust last year to pursue a new career with a technology company. Schar has more than two decades of banking experience at with Bear Stearns, Credit Suisse, Wachovia and Wells Fargo, but came to this job from a position as chief financial officer and chief compliance officer with ApplePie Capital, an online lender for franchised businesses.

Since coming to the bay area, Schar has joined the boards of the Tampa Bay Partnership and Junior Achievement of Tampa Bay. This spring, he arranged a meeting between a business delegation from St. Petersburg and the mayor of San Francisco, where Schar has connections from his days at ApplePie Capital.

Last week, Schar spoke with Tampa Bay Times business reporter Richard Danielson about what he’s learned about the Tampa Bay area, where SunTrust has 63 branches, how he’s adjusted his thinking in the new job and the potential impact of rising interest rates on the bank’s business. Here is the conversation, edited for length:

Q — Now that you’ve been on the job eight months or so, what about the job or the market has surprised you?

The level of activity here and growth is pretty extraordinary. Some folks talk about population growth, but really there is economic growth that is well above the national average. As I think about the west coast of Florida — Tampa/St. Pete, Sarasota/Bradenton and down to Fort Myers — those are three (areas) that I think Forbes ranks as top 25 fastest-growing cities in America, and I have three of them right here in my part of the state.

Q — Has that recognition informed your approach to the job in a way that wasn’t on your plan in January but is now?

I knew coming in that this would be a great opportunity. SunTrust has a great brand in the Tampa Bay area. We have a long legacy here. We’ve got good people. But now I’m even more excited than ever to be able to take what we have, which is a really good market share position, and to grow it with the market and take additional market share.

That’s actually changed my strategy a little bit to: Let’s play offense. Let’s go after the market.

Q — What does playing offense entail?

We’re hiring and expanding our client-focused folks, our relationship managers. We’re growing our product capabilities and trying to be more aggressive on the types of businesses we’re going after.

Our platform offers a lot more than the traditional SunTrust Bank has offered this community. For instance, our health care industry specialty group focuses on the specific needs of hospitals, physician practices and long-term care facilities. Those are places where we’ve got a great business, but we’re looking to expand those, pretty dramatically.

Just this year, within that vertical specialty of health care, we created the aging services specialty, because it’s a very specific set of needs by those clients. There’s regulatory elements to it. There’s complexity. So we actually formed a group at SunTrust who specifically focus on aging services. Now that we’ve done that, we have a differentiated offering, and we want to expand and grow that business.

Similarly, with technology and innovation-related companies, we are partnering with a local venture capital firm (Florida Funders) and providing the services and capabilities that those companies need as they scale up and grow. This is a growing area in this region, so we want to partner with organizations that can help accelerate that industry.

Q — Three times since December the Federal Reserve has raised interest rates, and in response SunTrust has raised its prime lending rate, from 4.25 percent in December to 5 percent now. How has that affected your business?

When the Fed raises their rates, all the banks raise their prime rates in lockstep with that. So it’s not just SunTrust. It’s Chase, Wells Fargo.

Interest rates were unusually low for a very long time e_SEmD 10 years plus — artificially held low by the Fed to induce economic activity. So now we have economic activity, and they’re raising interest rates so we don’t get an overstimulated economy.

A lot of our commercial clients have actually locked in interest rates through interest rate swaps, so they’re not experiencing the rising interest rates that somebody who didn’t lock in those interest rates would have had.

Rising interest rates have allowed us to pay depositors more for their deposits. That’s something we have aggressively provided to our clients.

Q — Looking at SunTrust’s second-quarter earnings report, which said total revenues rose 3 percent year-over-year, largely because of higher interest income, it looks like so far, so good. If interest rates generally continue to rise, are there lines of business at SunTrust that you expect would be affected, and how?

I would say, yes, there are going to be lines of business that would be affected positively and negatively. We have such a large business. There are lots of things that actually get better as interest rates go up and there are some volumes that go down. But I think as long as we’re having performing assets, I don’t see it as being a headwind to our business.

Going back to the point before: We have such great economic activity in the state of Florida and in our markets in particular, that a rising rate environment, in a great economic environment, (means) we are going to do very, very well, and if our clients have financing needs, we are going to give them the best financing terms that the market will bear.

(It’s) an area that I don’t run, but residential mortgage refi’s would probably go down over time when interest rates go up.

But new commercial mortgages actually increase in volume. We’re seeing, right now, increased activity across all of our business lines in the commercial space. With respect to small, medium and large commercial groups, we have increased activity, whether it’s cash flow and managing cash, people borrowing money to expand their businesses, companies and CEOs borrowing money to make acquisitions. We’re seeing much higher volumes in that business than in previous years.

Interest rates alone are not really driving the outcomes in the economy. People forget that.

Q — I would imagine you’ve got a dashboard of indicators and trends particular to the region that you pay attention to. What are two or three trends that you really keep an eye on, and what color are the lights on them right now?

One is just economic activity regionally, looking at domestic product output for these metropolitan areas. They’re growing at 5 to 6 percent. I’m tracking that. That’s been strong and rising. So I’ve got a positive green arrow on that.

We look at building permits, electrical hookups. There’s all kinds of indicators of economic activity that we can look at. Venture capital funding. Private equity funding levels. Those are usually indicators of velocity of forward-looking economic activity.

Then within the SunTrust business, we look at deposit trends, loan assets and the 2-10 split between the 2-year and the 10-year (Treasury notes), the flatness of the yield curve. There’s a very small difference between the 2-year and the 10-year right now.

FROM APRIL: SunTrust warns 1.5 million clients of potential data breach

Q — I imagine you keep an eye on your own assets to make sure you’re not seeing a rise in delinquencies. Any movement there, one way or the other?

No. Our loan book has had great performance. Very low delinquencies. A very high percentage of our loans are performing very well.

In fact, we’re lending more money to our existing clients, because their businesses are growing and supporting that additional leverage, not that we’re taking more risk.

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Contact >Richard Danielson> at rdanielson@tampabay.com or (813) 226-3403. Follow @Danielson_Times

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