A Midwestern banking behemoth is making inroads into Connecticut using a relatively rare strategy. Charter One Bank, a $43 billion institution based in Cleveland, has opened six de novo branches in New Haven and Hartford counties and plans to open more.

“We’re planning on adding another 10 to 15 in the next two years,” said Senior Vice President of Finance Julie Robbins.

Instead of opting to expand the way most banks do – by acquiring other banks in the state where the bank wants to grow – Charter One is building its branches from the ground up.

“There are two ways you can do it,” said Lindsay Pinkham, vice president of the Connecticut Banking Association. “It’s just another strategy.”

De novo branching isn’t unheard of, he said, but expanding through acquisitions has been more common in Connecticut. Although most other banks have chosen to expand through acquisitions, Charter One has found success by building new branches from scratch. It hasn’t acquired any banks in Connecticut and has no plans to, Robbins said.

“We did a lot of acquiring, like everybody else did, for a number of years,” she noted.

But the bank’s recent experiences with de novo branching have shown that it is a cheaper and easier way for Charter One to expand. It can cost 10 times less to build from the ground up, according to Robbins.

Because of the emphasis the bank puts on marketing and sales, Charter One branches usually turn a profit quickly, Robbins said. Starting from scratch also allows the bank to hire new employees and train them for the first time, rather than retraining another bank’s employees.

“We don’t have that transition pain when you shift bank cultures,” Robbins said. “We’re good at growing our branches.”

‘Banking Commotion’

So far, three of the bank’s new Connecticut branches are inside the Price Chopper supermarket chain, which is based in Schnectady, N.Y., and has 106 stores, mostly in the Northeast. The bank’s first branch, located in Waterbury – the bank’s only Connecticut branch located outside of Hartford County – is one of those. It opened in June 2003 and already is breaking even, Robbins said. The goal is for the new branches to break even in 18 months.

Two other branches, one in Bristol and one in Southington, also are located in Price Chopper. Those opened two months ago.

“The ones that opened in January are doing very well,” Robbins said.

Three traditional branches also have opened recently. The bank’s Rocky Hill branch opened earlier this year and branches in Newington and Manchester opened in late 2003.

Although the bank hopes to open more branches in Greater Hartford as a part of a larger expansion plan, Robbins won’t reveal the locations.

De novo branching may be relatively rare in Connecticut, but it’s not unheard of.

People’s Bank recently announced the sale of its credit card division and plans for expansion and de novo branching could be part of that, according to spokeswoman Valerie Carlson.

“[We’re considering] both de novo and potentially through acquisitions,” she said.

People’s intends to expand throughout the Connecticut and into neighboring states.

Other banks in the area also have expanded through de novo branching.

Canaan National Bank opened a branch in Egremont, Mass., in 1997 and was successful, said bank President Jerry Baldwin. It expanded from its main office, which is close to the Massachusetts border, because many customers were coming from the Bay State to do their banking.

Rhode Island bank Washington Trust also expanded into Connecticut through de novo branching, but several of its new branches went under, Pinkham said.

It’s hard to tell how Charter One will do in Hartford and how its new branches will affect the other banks in the area, said John Carusone, president of the Bank Analysis Center in Hartford.

“They’re an unknown quantity in this market,” he said. “I don’t think they represent an immediate competitive threat.”

One competitor will be People’s Bank, which has branches all over the state and has been there for years. People’s is accustomed to competition and also has branches in Connecticut supermarkets.

“We have competition in all of our markets and we’ve been in the state of Connecticut for 162 years,” Carlson said. “We bring a brand of customer service and convenience in our Super Stop & Shop branches we feel is unparalleled.”

The usual strategy that banks use when expanding through de novo branching is to go into areas where there are few banks.

“The easiest thing is to go into an area that’s underbanked,” Pinkham said.

But there aren’t many areas that are underbanked anymore. For Charter One, marketing and providing customers with good product will be important, Pinkham said. Even more important could be location.

“What makes it successful? It could be the right location, as simple as that,” Pinkham said.

One stumbling block will be the bank’s lack of name recognition and the loyalty some in the area feel toward existing banks, but the bank’s abundant financial resources combined with recent mergers and the advent of several de novo banks across the state could work in favor of the institution. The bank’s financial backing could allow it to offer low, competitive prices on loans, and the upheaval in the banking industry in Connecticut – which could, in the case of mergers, alienate some customers – make this a good time for Charter One to expand into the Hartford area.

“I think in the Greater Hartford market … there’s going to be quite a bit of banking commotion,” Carusone said. “I think the timing is right to penetrate the market.”

Executives at Charter One see Greater Hartford as a growth area, Robbins said.

“We really like that area,” she said.

Hartford also has similarities to other markets where the bank has found success, she added, noting, “We like larger metropolitan areas.”

Charter One mass-markets and tries to appeal to a broad audience, she explained.

“Hartford … has enough people and we have great products and services that will appeal to them,” Robbins said.

Charter One also plans to open 67 new branches in Wal-Mart stores in six states, according to the Associated Press. Those stores are slated to open in Illinois, Indiana, Michigan, New York, Ohio and Pennsylvania.