As much as executives at community banks need to focus on the emerging challenges posed by non-bank competitors, so too are the priorities of the globally systemic banks like Citi, BNY Mellon and JPMorgan Chase important to understand. So file today’s post under “know thy enemy….”
At a time when many community bank CEOs sweat margin compression, efficiency improvements and business model expansion, it is very interesting to take note of the six areas of focus for JPMorgan Chase. Last week, Gordon Smith, their Chief Executive Officer for Consumer & Community Banking, provided insight into the behemoth’s strategic agenda at the company’s investor day. Their focus touches on the following key areas; the first five should resonate with bank leaders at institutions of all sizes:
- Continue to improve the customer experience and deepen relationships;
- Reduce expenses;
- Continue to simplify the business;
- Maintain strong control environment and automate processes;
- Increase digital engagement; and
- Lead payments innovation.
As Mr. Smith lays out, their deposit growth has been strong and core loans show continued improvement. From a community bank CEO’s perspective, this is important as JPMorgan Chase’s organic growth may precipitate an even greater desire for smaller institutions to merge with another. Indeed, I continue to see banks eyeing deposits, not just assets, as a catalyst for bank M&A (*this is not to suggest JPMorgan wants to buy another bank, as I don’t think regulators will allow any significant acquisitions from them nor do they seem to have even a sliver of interest. While they have a rich history of acquisition, I’m pretty sure they’ve reached their cap in terms of deposit market share).
Further, with their bank branches becoming more “advice centers,” it strikes me that many community bank operating models should aggressively shift to employing fewer people serving in more of a consultative capacity. True, this model has been effectively emulated by some, most notably pioneered by Umpqua in the Pacific Northwest. However, I see far too many local and community banks still arranged as if a bank will be robbed faster through the front door than it will the internet. The implication remains that a transaction trumps a relationship. Finally, as banks like JPMorgan Chase divest various branches based on their drive for greater efficiencies, it should be helpful to think about some of their spun-off locations as potential targets that can bolster a regional presence.
So if you work for a community bank, it’s important to pay attention to the big banks. Sometimes, they can help you.