The mannequins in the windows at the corner of Madison Avenue and 48th Street are dressed in the rustic casual garb that you would expect to see in Connecticut horse country. Inside, sales associates are dressed in Gap-like gear: blue shirts, khaki pants, and navy sweaters. But there's not a rack of cargo pants in sight, and denim shirts are in short supply.
If you want a mutual fund, however, a young woman is eager to help. If it's a checking account you need, step right up to the concierge station, and a friendly young man will direct you to the right nook. If your kids get fussy while you're chatting about overdraft protection, send them over to the kids' corner, called WaMu Kids, where they can amuse themselves with Nintendo games.
This is the bank of the future, WaMu-style. There are no teller windows. No velvet ropes. Deanna Oppenheimer, the president of WaMu's banking and financial services group, says that the bank's look and feel was intended to "really put the 'retail' in retail banking." Known internally as Occasio (Latin for "favorable opportunity"), the format grew out of 18 months of intense market research that investigated every customer touch point in a branch.
One of the primary innovations of the bank's design is teller towers, pedestals where sales associates stand in front of screens fielding transactions. They handle no money. Customers who need cash back are given a slip, which they take over to a cash-dispensing machine. This is central to the bank's true goal: cross-selling products. Since they aren't tethered to a cash drawer, tellers who discover that a customer's kid just got into college can march that person over to an education-loan officer. Or they can steer newlyweds to the mortgage desk. WaMu's studies have shown that as customers add products, retention rates soar: After one year, 96.4% of customers with four products are still with the bank, while only 75.5% of those using one product are still around.
It's a powerful formula. In the past decade, the bank's free-checking accounts attracted 3.5 million households -- 1.2 million of those since year-end 2001. Four years after opening an account with a $1,411 balance, the average customer has a relationship with the bank that's worth $23,361 in deposit, investment, consumer-loan, and mortgage-loan balances. By the end of September 2002, WaMu had posted a year-over-year 25% increase in depositor and other retail-banking fees, a 75% increase in consumer-lending volume, and a 75% increase in mortgage volume. Acquisitions aside, WaMu managed to add more than 1 million customers last year through internal growth.
Those may be impressive numbers, but until now, the capital markets have not been completely dazzled (although WaMu shares have been up a dazzling 150% in the past three years). Dick Bove, an analyst at Hoefer & Arnett, notes that WaMu has the lowest P-E ratio of any stock that his firm follows. Mortgage banking just isn't sexy. Part of the reasoning behind the Dime purchase, Killinger says, was to try to get Wall Street's attention: "By moving into New York, we wanted to show the capital markets firsthand what our business model can do. Give us a couple of years of operating aggressively in New York, and I think it could have an impact on investors."
Fatiha Berger, a housewife from Queens, is desperately seeking the mortgage officer whom her husband told her to meet at WaMu's financial center on Madison Avenue. "Is this a bank?" she asks a bystander. "I prefer the old way, where the door is closed and I can look somebody in the eye before I sign over my life savings."
David Gold, an equity analyst with Sidoti & Co., is heading for the door as well. He was sent as an emissary by his pals to check out WaMu's Platinum checking account, which is reputed to offer an interest rate of more than 3%. But the lines are too long, and WaMu's hours are too abbreviated for his lifestyle. "My business day ends at 7 PM, so this doesn't help me," he says.
Nobody said it would be easy to take Manhattan. Or Florida. Or California. The problem with acquisitions is that you inherit headaches along with assets. WaMu's flurry of acquisitions during the most frenzied mortgage-refinancing market in decades has also strained back-office systems. "In 1996, we serviced loans for about 140,000 customers," says Craig Davis. "Today, that number is north of 6 million customers." Meanwhile, during the past two years, while WaMu's bankers were writing massive numbers of loans, the firm was deploying new technology and trying to integrate six acquisitions: That meant some 4 million new customers. It was a recipe for disaster.
Property taxes were paid late on 55,000 loans, escrow accounts were bungled, and mortgage payments got lost between centers. In some cases, home owners were threatened with foreclosure when the bank wrongly thought their accounts were in arrears.
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