Coming off of last week’s Growth Conference, I found myself planning for next year’s program. As we recognized Customers Bank, State Bank & Trust and Cole Taylor Bank for “winning” our annual Growth rankings, I spent some extra time looking at other banks that performed exceptionally well this past year. So today’s Friday-follow inspired post shares a few thoughts and conversations I’ve had about three very successful banks.
(1) While easy to frame the dynamics of our industry in terms of asset size, competing for business today is more of a “smart vs. not-so-smart” story than a “big vs. small.” During one of my favorite sessions last week — David AND Goliath — Peter Benoist, the president and CEO of St. Louis-based Enterprise Financial Services Corp, reminded his peers that as more banks put their liquidity to work, fierce competition puts pressures on rates and elevates risk. My biggest takeaway from his presentation: we all talk about scale and net interest margins… but it’s clear that you need growth today regardless of who you are. It is growth for the sake of existence.
(2) During the afore mentioned presentation, the participants all agreed that you cannot compete with BofA on price. Consequently, the ability to introduce new products (e.g. increasing deposit platforms) is key for many banks today. So from diversification to differentiation, let me turn my attention to San Francisco-based First Republic. Their story is a fascinating one. While not with us in New Orleans, I heard a lot about them yesterday while I was in NYC visiting with KBW. Subsequently, our editor wrote me with some background: Jim Herbert founded the bank in 1985, sold it to Merrill in 2007 for 360% of book, took it private through a management-led buyout in July 2010 after Merrill was acquired by Bank of America, then took it public again in December through an IPO. First Republic is a great bank: it finished 3rd out of 80+ in the $5-$50 billion category in Bank Director magazine’s 2012 performance rankings. But not only is it solely focused on organic growth, it’s also focused solely on private banking.
(3) Finally, as we move our attention from growth to risk in advance of our annual Bank Audit Committee conference, I started to think about the challenges facing banks of all sizes. Admittedly, I started with Fifth Third as their Vice Chairman & CEO will be joining us in Chicago as our keynote speaker. Yes, I am very interested to hear his perspectives on the future of banking. Quite a few small bank deals have recently been announced, and I have to believe many sales came together thanks to escalating compliance costs and seemingly endless regulation. For larger institutions like Fifth Third, it will be interesting to see what transpires over the next few years and where he thinks the market is moving for banks of all sizes. If you’re interested, take a look at our plans for this year’s event.
About today’s picture:
I’m a die-hard Boston RedSox fan, and for anyone whose been early to, or stayed late at, Fenway Park, you’ve probably seen one red seat in the right field bleachers (Section 42, Row 37, Seat 21). Did you know it signifies the longest home run ever hit at Fenway, one struck by the great Ted Williams on June 9, 1946? While a nice chance for me to share my love for the RedSox, I thought the visual made a lot of sense when writing about standing out from the crowd… -AD