CEO Speaks: Banking On the People

Fifteen years ago, Kerry Killinger took over a tiny regional thrift called Washington Mutual. Today he runs the nation’s seventh largest financial firm and has a rep for bringing customer service–such as free checking–back to banks. He talked shop with TIME’s BARBARA KIVIAT.

TIME Do you ever get lonely out there in Seattle, with most of the other big banks based on the East Coast? KERRY KILLINGER Well, with my job, I’m traveling more than half the time. But I’ve always felt there was an advantage in being a retailer, which we are, and coming out of the Pacific Northwest. Customer expectations are very high. If you’re successful in the Northwest, you tend to export that successfully around the country. We have a disproportionate number of industry-leading retailers here: Starbucks, Costco, Nordstrom, Amazon.

TIME How are you expanding your footprint these days? K.K. We now have a national franchise with an emphasis in California, Texas, Florida, Arizona, Nevada, Georgia–those high-growth states–and rounded out with the Northwest and large metropolitan areas like New York, New Jersey, Chicago and Denver. The primary expansion we’re doing today is to put new stores into those existing markets.

TIME So it’s about getting a Washington Mutual on every corner next to Starbucks? K.K. There we go. Works for Starbucks.

TIME How big do you want to be? K.K. We just laid out a new five-year plan. We see the opportunity for double-digit growth in our four key businesses: retail banking, home lending, multifamily lending and nonprime residential lending.

TIME But what about 10, 15, 20 years? Is the goal to get as big as Citigroup? K.K. We’re really not about being large in assets like some of the other banks. We want to be the bank for everyday people that–by concentrating on consumers and small businesses–has an advantage over competitors who are trying to serve commercial and international markets as well.

TIME Your mortgage business slipped over the past few years as the refinancing boom slowed. Are things back in order? K.K. A year ago, we had a poor second quarter, and I told the capital markets that we had challenges in the mortgage area. I said we’re going to address them head on, and here’s what we’re going to do over the next year: we’re going to strengthen our management team, we will aggressively bring our costs down, and we will refine the hedging strategies in order to reduce some of the volatility that we had experienced. And I was able to report to our shareholders at our conference call [on July 20] that we really have accomplished all of that.

TIME You just bought Providian Financial. Why credit cards? K.K. Credit cards are an important product for our customers. It was a hole in our product line. Going the other way, we have the opportunity to offer [Providian’s] customers basic checking accounts, home-equity loans, mortgage loans and savings products. Another very important part is that it will help us diversify our balance sheet to loans other than prime residential home loans.

TIME What are you doing for businesses? K.K. The next major area for us is to bring free checking to small businesses. That is something we’re rolling out all over the country, and it’s growing extraordinarily quickly. On the heels of that, we’re developing automated loans, trying to make that as streamlined a process as we possibly can.

TIME Do you still have your offices on the lower floors of the Washington Mutual Tower in order to save on rent? K.K. The 16th floor is where the executive offices are–of a 55-story building. The rent was lower. And from an image side, we didn’t want to be like every other bank, on the top floor of some big high-rise. That’s just a little different position.