FI Tip Sheet: You Can Hang Your Hat On It

It’s been a while since I last called Dallas home; still, the white shirts & gray shorts of St. Mark’s proved a welcome and familiar site during a trip to the Texas city earlier this week.  A flashback to my freshman year of high school?  Absolutely.  Dare I reminisce before diving into today’s post with a few random fun facts.  Heck yeah.  Did you know Dallas lies in a large prairie running through the center of the United States?  Ok, anyone who has visited know it is fairly flat… but did you know it is one of the largest cities in the world not located on a navigable river?  Yes, this is a city where I learned about Coke floats, Suburbans and sayings like “if I say a hen dips Skoal, you can look under her wing for the can.”  Curious how I’m going to relate my time in Big D to the banking space?  Read on.

Roping it in
Roping it in

What Happened to Citi’s Hutzpah?

Even with wifi-enabled planes, I still find travel by air the best way to work uninterrupted.  The luxury of my iPhone laying silent this week?  A chance to catch up on various blogs and articles like those authored by Jack Milligan.  The editor of Bank Director magazine, he took a look at how large U.S. banks, specifically Citigroup, are being dogged by intense regulatory scrutiny and have the challenge of preparing for much stricter capital standards in coming years. By noting Citigroup was the only bank of the six largest U.S. banks to flunk the latest round of stress tests, he sets up his must-read “Where Has the Go-Go Bank Gone?”  In his view, cutting expenses and selling off non-core business units doesn’t seem like a bold enough plan for the behemoth.  Per Jack, “maybe what this Citi needs is a little of the old Citi’s hutzpah.”

Pay Attention to Your Sales Process

On Wednesday, I made it to Preston Road and St. Mark’s School of Texas for a few minutes in large part because of Ignite Sales (the company’s offices are a few miles away from the all-boy school where my parents enrolled my brother and me when my father took a job with the then-6th largest bank in the country, Bank One).  As I talked with Ignite’s CEO, Mitchell Orlowsky, he made clear that non-bank competitors are eating away at banks’ customer base, in part because banks have paid little attention to the sales process. As he shared earlier this month, “banking has never had to focus on a comprehensive sales process. Because of healthy margins from loans and fees, banks have historically shied away from proven sales methods found in other industries. However, now that the market has become competitive, the lack of sales infrastructure hurts.”

A Silver Lining

Mitchell shared how more progressive banks have begun to hire experienced sales management from other industries that bring the expertise needed to change this culture.  I thought about this approach as I dug into a Raymond James report on the outlook for the spring (“Banking Industry Overview“) on my flight home to D.C.  In their view, first quarter 2014 results are “likely be highlighted by continued improvement in credit quality, a pickup in commercial loan growth, net interest margin (NIM) stabilization, and improved profitability.  However, these positives will likely be mitigated by weak year-over-year comparisons for market-related revenue, sluggish balance sheet growth, and a continued decline in mortgage banking activity.”  Of particular note: they expect the M&A discussion to gain prominence given the pickup in deal activity and “outperformanceof stronger acquirers who have recently announced transactions” along with the following catalysts:

  • The modest pace of economic recovery
  • Increased regulation
  • Protracted low rate environment
  • Higher capital requirements
  • Aging management teams/boards

I continue to hear that M&A activity will remain largely relegated to smaller deals for banks with assets of $1 billion or less — and this report certainly reinforced this view.

Aloha Friday!

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