Arabian colts and Porsches: how one bank is dealing with competition

Has your daughter been asking for a pony for her birthday? Put $100,000 in a five-year certificate of deposit at First City Bancorporation in Houston and it's hers. If you have no need for an unbroken Arabian colt, you could opt instead for an 18-day trip to China or South America, among other things.

A million dollars gives you a choice of a Porsche 928 S or a Cessna 172 airplane. Pilot lessons are included.

Even a relatively modest investment -- $5,000 for five years -- will get you a Fisher videocassette recorder. (All the five-year CDs pay 10.9 percent simple interest, which is taxable and subject to change.)

The bank hasn't roped in any million-dollar investors yet, but one person is looking closely at the Cessna and another at the Porsche, says Donald Ruggiero, vice-president for marketing. It's sold about a dozen colts. In the first 61/2 weeks of the program (which began in July), the bank attracted more than $200 million in deposits, Mr. Ruggiero says. It has sent out 11,000 to 12,000 gifts.

While First City's campaign for new customers may be more dramatic than other banks, its strategy is mirrored by financial institutions across the country.

Banks are having to protect their turf as ``nonbank banks'' like Sears, Roebuck or big ``money center'' banks like Citicorp move across state lines. They are also searching for a stable source of funds. First City was big on lending to the energy industry, which has been hard hit over the past few years.

Banks are putting a lot of money into studying their customers and their competition. Ruggiero says First City spends up to a third of its product development budget on market research. Moreover, competition has introduced a new element into banking culture -- salesmanship. First City awards merchandise or raffles off trips to top-selling employees.

Does this sound like banking? Not the banking of the past, perhaps. But the future may hold fewer toaster ovens and more VCRs.