Capital One is far from alone in seeking to handle banking needs for middle-market businesses.

But the lender’s commercial banking president says that focus won’t change, whereas bigger bank rivals are prone to swing their attention back to large corporate companies when lending activity there revs up.

“The large corporate space gets absolutely fantastic coverage and products. The middle market gets really inconsistent coverage, and so I feel like it's a pretty underserved market, and that's why we're so focused on it,” said Neal Blinde, who heads up the commercial bank at McLean, Virginia-based Capital One. 

Blinde, who joined Capital One in 2022 after serving as treasurer at Wells Fargo, said the largest commercial banks feel a “major pull” to the largest part of the market, given the amount of leverage in that space, he said. 

Those corporate clients receive plenty of attention because “the amount of dollars of lending exposure, the amount of fee revenue that comes from each individual relationship, is just so much larger for a relationship manager,” Blinde said during a recent interview.

Yet as growth in commercial real estate and commercial and industrial lending has stagnated, large banks have more recently looked to midsize businesses to power growth, Blinde said.

At some point, when growth returns at the larger end of the market, “all of a sudden, you're a middle-market customer, and you're saying, what happened to my best friend who was giving me all kinds of attention?” Blinde said.

Capital One, which currently has $669 billion in assets, is competing against more than just the top banks, though.

The biggest banks have moved upmarket, said Tom Collins, a senior partner in the financial services practice at consulting firm West Monroe. But that shift “opened a massive opportunity that the regional bank space has taken advantage of,” he said.  

There’s a slew of banks in the $50 billion- to $150 billion-asset range that have, over the last decade, stepped in to sufficiently serve smaller, rapidly growing businesses, Collins said. Among others, Cleveland-based KeyBank and Phoenix, Arizona-based Western Alliance have targeted middle-market growth. 

Capital One’s commercial bank makes up about 20% of the company’s business overall, Blinde said. The lender’s commercial segment includes corporate banking, CRE and capital markets, with all three focused on middle-market customers. That typically covers businesses generating between $25 million and $2 billion in revenue. 

Capital One’s commercial bank generally covers the landscape. Food and beverage is a more nascent industry vertical for the bank, while healthcare is more established and its offerings mature, given acquisitions Capital One made in 2015 and 2021, Blinde noted. 

“We want middle-market clients to experience the kind of specialized coverage, advice and products that the very largest corporate customers experience,” Blinde said. 

Loan sizes may be smaller in the middle market, but it’s a segment that still needs bespoke relationship management, and small business banking services don’t quite fit for those clients, Blinde said.

Capital One’s commercial bank, launched in 2005, has about 1% market share, Blinde said. That means there’s plenty of opportunity, although CEO Richard Fairbank “does not set growth objectives for any part of the business,” Blinde said. “There’s absolutely no pressure to drive to any particular result.”

In the fourth quarter, commercial banking loans increased less than 1%, to $89.3 billion, according to an earnings release. The segment’s total net revenue rose 3% from the prior quarter, but fell 2% year over year, to $930 million, according to an earnings presentation. 

The commercial bank has been on a “constructive” path, Blinde said, and as product offerings have been defined and enhanced, customer engagement is improving.

Blinde declined to comment on Capital One’s recent announcement it will acquire corporate card and spend management fintech Brex for $5.15 billion. But Collins said the deal “advances the ball” for the company’s commercial bank.

One of Capital One’s internal objectives was to “try to bridge the gap” between the card business and the commercial banking business, Collins said. 

A number of commercial lenders have “over-indexed” on the lending side and know they need to catch up on the payments side, Collins said. Integrating Brex moves Capital One “way down the path” of commercial payments, with a tech-forward platform, he said.

The deal “puts a lot of pressure on other commercial lenders who have to keep pace now with this capability and really remain at the forefront on commercial payments and treasury management,” Collins said. 

Capital One aims to meet middle-market customers’ need for advice, too, Blinde said. 

That includes guidance on artificial intelligence, because the bank was an early mover with data capability investments and moving to the cloud. Capital One can lean on its own experience implementing AI tools and training programs to help clients, Blinde said, advising them on best practices in something akin to a consulting role.

The AI learning curve can be “a real challenge” in the middle market, “because you just don't have as much available investment capacity and as fully mature [human resources] and training departments,” he said. “Banking partners can really help, because you can bring in people from our team who have been through that.”