Category: Bank Director

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Acquire or Be Acquired: Don’t Overlook This

Thanks to our keynote speaker, J. Michael Shepherd, pictured above. The Chairman & CEO, Bank of the West and BancWest Corporation, he inspired quite a few with both his wit and wisdom.

Over the past few days at Bank Director’s annual Acquire or Be Acquired conference, various speakers have touched on a number of key strategic growth issues.  From exploring an acquisition to growing loans, controlling expenses to managing capital, the discussions hit the “timely and relevant” standard that we consider essential.  They also reinforced my sense that more boards and their management teams are seriously considering an acquisition as their primary growth plan than at this time last year.

As our editor-in-chief opined, the heightened level of interest could certainly be explained by the continued margin pressure that banks have been operating under for the last several years.  For those thinking about buying another, my short video recap from the mid-way point of AOBA offers a heads up about a pre-deal consideration not to be overlooked.

 

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What’s Happening at Acquire or Be Acquired

Throughout the first day of Bank Director’s 22nd annual Acquire or Be Acquired Conference, I found quite a few presentations focused on the emergence of mid-sized regional banks that are growing through the consolidation of smaller banks.  Clearly, mergers & acquisitions provide an avenue for some banks to drive improved operating leverage, earnings, efficiency and scale.  At the same time, the pressures prompting larger banks to innovate — sluggish loan demand, depressed revenue, higher compliance costs — are the same ones forcing smaller banks to pursue a sale.

By Al Dominick, President & CEO, Bank Director

For those unfamiliar with “AOBA,” this annual event explores issues like the one mentioned above.  Since the conference kicked off at 8 AM on a Sunday, this morning’s post shares three short video recaps from my time at the Arizona Biltmore followed by links to recent posts specific to this conference.

In addition to these videos, below are links to four of my posts specific to the event:

If these types of conversations interest you, take a look at what we’re sharing on BankDirector.com.  Additionally, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, and search & follow #AOBA16 to see what is being shared with (and by) the 930 men & women in attendance.

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9 Banks I Bet People Will Be Talking About at Acquire or Be Acquired

I planned to write about a number of banks I was excited to see this weekend at AOBA.  But as Steve Jobs once shared “people don’t know what they want until you show it to them.” In this spirit, let me highlight nine banks that I anticipate our attendees will be talking about in Arizona at Bank Director’s annual M&A conference.

In a few minutes, I’ll hop an American flight to Phoenix for this year’s Acquire or Be Acquired Conference.  Before I depart the cold and slush of D.C. for some warmth and sun in the desert, this is my take on the banks I anticipate people talking about when we’re all together:

  • Bank of the West — and not just because their CEO is keynoting this year’s conference.  The bank, with more than 700 branches in the Midwest and Western United States, has long been a personal favorite of mine and competes in markets where many look for inspiration.
  • Bank of North Carolina — because they’ve been wheeling and dealing and are a great example of how an acquirer successfully integrates cultures (*yes, their CEO also speaks at AOBA this year on a CEO panel entitled Finding the Right Partners).
  • United Bank — having picked up a trophy franchise of their own in my hometown (another personal favorite of mine, Bank of Georgetown) they’ve made a number of interesting deals over the past few years and I bet have more on their mind.
  • BB&T — having dealt for Susquehanna in ’14 and National Penn in ‘15, it is fair to ask: who’s next?

By no means are these all of the banks that will come up in conversation; rather, those that are top of mind.

One final thought before hopping my flight west.  The recent volatility in the stock market may be impacting institutions considering a capital raise, IPO or acquisition — but this week’s deal pace is far different then at this time in recent years.  The patterns I’m beginning to see is a concentrated effort to get to over the $5Bn asset mark and into that sweetest of spots: the $5Bn to $50Bn asset class.  A point I’ll elaborate on in an upcoming post/video.

So if you are interested in following the conference conversations via social channels, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, and search & follow #AOBA16 to see what is being shared with (and by) our attendees.  Safe travels to those 930 men & women joining us this weekend!

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Five Reasons Why Banks Might Consider Selling in 2016

You might think every bank CEO I meet wants to talk about buying another institution; truth-be-told, some recognize that tying up with another makes a lot of sense.  So this post looks at why now may be the right time for a bank’s CEO and board to consider a sale.  It plays off the idea that in many markets, organic growth options are limited and times are tough for banks, especially those under $1Bn in asset size.

By Al Dominick, President & CEO, Bank Director

Over the past three years, a number of bank executives and board members have struggled with whether to buy or sell their bank — or pursue growth independently.  Over the same time, Bank Director has welcomed more than 1,300 bankers — from more than 500 financial institutions — to our annual M&A conference to explore their short- and long-term options.

This year, those numbers go up in a BIG way. Indeed, we have 600 bankers from 300+ banks joining us at the Arizona Biltmore for “AOBA” this upcoming Sunday through Tuesday.  To me, this signals that more potential buyers & sellers are getting off the sidelines and into the bank merger and acquisition game.  So in advance of Bank Director’s 22nd annual conference, here are five challenges that a bank’s CEO and board might want to consider.

  • Peer-to-peer lenders, credit unions and some — not all — FinTech startups either are (or will be) fierce competitors to community banks.  In addition, non-bank giants in technology, retail, media, entertainment and telecom are making noise about entering banking.
  • When margins decline, bankers try to compensate by improving operational efficiencies.  While slow growth + strong cost controls may allow for short term survival, such an equation doesn’t bode well for the long-term viability of many institutions where investors expect more significant gains.
  • The pressures prompting larger banks to innovate — sluggish loan demand, depressed revenue, higher compliance costs — are the same ones that will continue to force smaller banks to pursue a sale.
  • Let’s face it: the typical bond between a bank and a customer is is not personal nor very strong and the absence of real customer loyalty undermines the traditional business model most banks operate from (*and yes, I know that banks with dedicated customer bases enjoy significant advantages over any potential competitors. But let’s be honest about how dedicated such customers really are).
  • Finally, at many community banks, older management teams and a dearth of local talent mean there may be no one to hand over the reins to in the coming years.

Now, it has been said that business is not about longevity, it is about relevance.  So as Bank Director’s team continues to gear up for this year’s Acquire or Be Acquired conference, these five questions merit serious conversation and consideration both leading up to, and at, our 22nd annual event. For those not able to join us — but interested in following conversations such as these — I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, and search & follow #AOBA16 to see what is being shared by (and with) our attendees.

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7 Bank M&A Trends for 2016

With this morning’s news that Huntington and FirstMerit are set to merge, it is clear that more and more buyers & sellers are getting off the sidelines and into the bank merger and acquisition (M&A) game.  So in advance of Bank Director’s 22nd annual Acquire or Be Acquired Conference, seven M&A trends to consider.

By Al Dominick, President & CEO, Bank Director

As I shared in yesterday’s post, we are putting the finishing touches on this year’s Acquire or Be Acquired conference. With nearly 600 bank officers & directors from 300+ banks joining us at the Arizona Biltmore for “AOBA” this Sunday through Tuesday, what follows are seven trends in bank M&A that I expect this hugely influential audience to hear and work to address.

  • Deal volume is holding steady; however, median deal price is on the rise.  One caveat: pricing has a strong correlation to both the size & location of a seller + the size of the potential buyer.
  • Growing banks must seize upon opportunities based on future needs, not just present needs
  • At the same time, more investors are taking a “what have you done for me lately” approach and emphasizing nearer-term results. Further, activist investors are becoming more prominent and driving some of this action.
  • Capturing efficiencies continues to be one of the most compelling forces driving industry consolidation.
  • When people tell you that size doesn’t matter, realize that banks with less than $500 million in assets have had the lowest return on equity for 11 out of the past 12 quarters (per SNL). Expect even more sellers to emerge from this part of the industry.
  • As the regulatory environment becomes increasingly difficult to maneuver, it is safe to anticipate an increase in merger activity — mostly for banks with less than $50 billion of assets.
  • As evidenced by Huntington Bancshares announcing today that it would buy FirstMerit Corporation in a deal worth $3.4 billion in stock and cash, mergers are a viable option for growth among the larger regionals.  While we don’t have the same kinds of national consolidators buying up banks like they once did, deals like this one, KeyCorp announcing it would buy First Niagara Financial Group and New York Community Bancorp that it would buy Astoria Financial at least opens the possibilities of larger players getting back in the merger game.

Whether you are coming to the conference or just interested in following the conversations, I invite you to follow me on Twitter via @AlDominick and/or @BankDirector — and search & follow #AOBA16 to see what is being shared with and by our attendees.

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4 Things to Know In Advance of Bank Director’s 2016 Acquire or Be Acquired Conference

Why banks are bought or sold involves much more than just the numbers making sense. Indeed, to successfully negotiate a merger transaction, buyers & sellers must bridge the gap between a number of financial, legal, accounting and social challenges. So in advance of this year’s biggest merger and acquisitions (M&A) conference, a few things I feel attendees of “AOBA” should know.

By Al Dominick, President & CEO, Bank Director

Starting this Sunday at the Arizona Biltmore, Bank Director’s team once again opens the doors to our annual Acquire or Be Acquired Conference — affectionately called “AOBA” (ay-oh-bah).  About this time last year, I wrote about a record turnout, one we will exceed in a few days when 925 men and women arrive at this architectural gem.

By design, the numbers I share in the image above only reflect key data from the financial institutions attending.  In fact, we are prepared to welcome another 60+ professional services firms and product companies to the Biltmore.   While I am particularly impressed by the caliber of support provided to the industry by our sponsoring companies, today’s post focuses on a handful of issues impacting the officers and directors joining us from strong and well performing community banks.

While big banks typically garner mainstream headlines — Wells Fargo, Citi, JPMorganChase and Bank of America account for a whopping $8.1 Trillion of the $17.3 Trillion assets held by banks in the U.S. — the buying and selling of banks takes place outside their domain.  The overwhelming majority of deals today involve community banks, many of whom have their CEOs attending AOBA.  So for this hugely influential audience, here are my key points to know and consider before the conference kicks off.

  • M&A remains attractive inasmuch as successful transactions improve operating leverage, earnings, efficiency and scale.
  • Today’s regulatory environment can hold up a deal — so it has become popular to note that banks can make acquisitions depending on how “clean” both the buyer and seller are + how big the resulting bank becomes.
  • As seen in their superior financial metrics (e.g. ROAA and ROAE), larger banks are growing and consistently outperforming smaller banks.
  • Small and mid-sized banks’ importance to the overall economy and select business sectors remains in place; however, their earnings potential is less diverse then big banks, making them more vulnerable to new competitors and shifts in pricing of financial products.

Certainly, the buying and selling of banks has been the industry’s “great game” for the last couple of decades.  As the conference agenda reflects, we dive deeper into topics like these and look at pre-deal considerations, post-integration challenges and everything in between.  So for those not able to join us — but interested in following the conversations — I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, and search & follow #AOBA16 to see what is being shared with (and by) our attendees.

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Size & Scale: The King and Queen of Bank M&A?

Earlier this week, I shared my perspectives on bank M&A with the Wall Street Journal.  What follows builds off the piece that ran in Tuesday’s print edition, highlighting key findings from Bank Director’s annual Bank M&A Survey.

By Al Dominick // @aldominick

At a time when J.P. Morgan is getting smaller, the pressure is on for smaller banks to get bigger.  As KPMG recently shared with BankDirector.com, there was a 25% increase in bank deals in the U.S. in 2014, compared to 2013, and there is a good possibility that the number of deals in 2015 will exceed that of 2014.  One reason for this: a larger institution can spread costs (such as investments and regulatory burdens) across a larger customer and revenue base.

Not surprisingly, 67% of executives and board members responding to Bank Director’s 2016 Bank M&A Survey say they see a need to gain more scale if they are going to be able to survive in a highly competitive industry going forward.  As our director of research, Emily McCormick, shared, “many of these respondents (62%) also see a more favorable climate for bank deals, hinting at a more active market for 2016 as banks seek size and scale through strategies that combine organic growth with the acquisitions of smaller banks.”

While the majority of bank executives and boards surveyed feel a need to grow, respondents don’t agree on the size banks need to be in order to compete today.  A slim majority, 32%, identified $1 billion in assets as the right size… interesting, but not surprising, when you consider that 89% of commercial banks and savings institutions are under $1 billion in assets, according to the FDIC (*personally, I’m of the opinion that $5Bn is the new $1Bn, but that’s a topic for another day).  On to the key findings from this year’s research:

  • Two-thirds report their bank intends to participate in some sort of acquisition over the next 12 months, whether it’s a healthy bank (51%), a branch (20%), a nondepository line of business (14%), a loan portfolio (6%) and/or a financial technology firm (a scant 2%).
  • Respondents indicate that credit culture, at 32%, and retaining key talent that aligns with the buyer’s culture, at 31%, are the most difficult aspects of the post-merger integration process.
  • More institutions are using social media channels to communicate with customers after the close of the deal. 55% of respondents who purchased a bank in 2014 or 2015 used social media, compared to 42% of 2011-2013 deals and just 14% of 2008-2010 deals (*FWIW, Facebook, at 26%, is the most popular channel for respondents).
  • Fifty-six percent of respondents have walked away from a deal in the past three years.  Of the respondents who indicate they declined to buy, 60% cite deal price while 46% blame the credit quality of the target institution.
  • Why do banks sell? Of the executives and board members associated with banks sold from 2012 to 2015, 55% say they sold because shareholders wanted to cash out.  Despite concerns that regulatory costs are causing banks to sell, just 27% cite this burden as a primary motivator.

The full survey results are now available online at BankDirector.com, and will be featured in the 1st quarter, 2016 issue of Bank Director magazine.  In addition, for those executives interested in connecting with many of the key decision makers driving the deals mentioned above, our annual Acquire or Be Acquired Conference will be held at the Arizona Biltmore from January 31 through February 2.

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Our 2016 Bank M&A Survey, sponsored by Crowe Horwath LLP, examines current attitudes and challenges regarding bank M&A, and what drives banks to buy and sell. The survey was completed in September 2015 by 260 chief executive officers, independent directors and senior executives of U.S. banks, and former executives and directors of banks that have been acquired from 2012-2015.

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There’s A New App For That

This morning, my company officially launched a state-of-the-art app to deliver a new monthly digital magazine which complements our quarterly, print-version.  A huge amount of time and effort went into the design, development and approval process, so I am very proud to share that Bank Director’s free app & digital magazine is now available for download through Apple’s App Store, Google Play and Amazon.com.  A HUGE thank you to our team that built it.  Also, my apologies to anyone looking to imitate this new offering.  It is home-grown and totally customized to the informational, educational and training needs of bank officers and directors today.

By Al Dominick // @aldominick

Since 1999, the number of commercial banks and savings institutions in the United States has decreased from 10,220 to approximately 6,500.  On the surface, this would not seem to be a robust market in which to base a business model.  However, among those still in the banking business, there is a tremendous appetite for information that will help a CEO, CFO, General Counsel, Chairman and board of directors to maintain a competitive edge — and that is the role that my team at Bank Director fills.

We designed Bank Director’s digital magazine specifically for tablet devices and incorporate interactive features such as animated infographics, video interviews and real-time polling.  Starting today, it can be accessed for free by downloading the app through Apple iTunes, Google Play or Amazon.com.  Unlike the print version — in circulation since 1991 — these digital issues have a distinct editorial focus each month.  Case-in-point, we light up the first issue with a cover story on the legal and compliance issues facing institutions interested in banking the marijuana industry.  Subsequent issues focus on attracting talent, growing the bank, serving on the audit or risk committee, handling governance and overseeing technology.

While many companies in the content business are moving away from print or simply discontinuing operations, we are ramping up to meet the needs of our audience.  This is not simply a replica of, or replacement for, our print publication.  It is a dynamic new product that allows us to stay on top of emerging trends.  For those of you familiar with our quarterly print publication, I hope this provides you added insight each month to the issues facing our industry.  For those of you not as familiar with Bank Director, I invite you to take a moment to experience this great new content now available anytime, anywhere.

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Banking Millennials

The Millennial generation comprises 80MM people, the largest in U.S. history.  Born between the years of 1980 and 2000, millennials range in age from 15 to 35 years and are just beginning to gain their foothold in the economy.

By Al Dominick // @aldominick

Do we really want to bank millennials? If I borrowed a crystal ball from one of the soothsayers out at Jackson Square in New Orleans’ French Quarter, I imagine this would be the question on most everyone’s mind that joined me at our annual Bank Board Growth & Innovation conference.  With many community banks making their money through C&I lending, the immediate concern (at least at the board’s level) is how do I grow right now?  While many conversations trended towards the opportunities to engage this demographic by leveraging emerging technologies with a bank’s sales and marketing efforts, I was not surprised to hear a concern about the investment costs of bringing new technologies into a bank.  The rationale, as I understood it, is by the time a bank gets a return from its investment, it may be too late.  I’m not saying this is my way of thinking, but I do think it reflects apprehensions by key officers and directors when the conversations comes to these future business owners, inheritors of wealth and digitally demanding individuals.  As shared in a presentation by Ingo Money, in the next five years, the Millennial generation will have the largest income in U.S. history, and any company that can monetize Millennial spending or data may seek to bank them.  Still, regional and community bankers wrestle with the type of client they might be — both now and in the future.

Key Takeaway

To kick things off, we invited Dave DeFazio from StrategyCorps to “look beyond the basics” in terms of mobile banking.  As he shared, over 75% of people in the U.S. own a smartphone in the year — and most everyone has some sort of addiction to their device.  With all of the big banks offering the “big five” today (mobile banking, mobile bill pay, mobile deposits, ATM/Branch locators and P2P payments), bankers should think beyond basic banking transactions to develop a mobile presence that is a “can’t live without” app.  Some of his tips: provide easy authentication, pre-login balances, voice recognition, budgeting tools and coupon and shopping tools.

Trending Topics

Anecdotally, the issues I took note of were, in no particular order:

  • The four biggest banks in the U.S. are among the 10 least loved brands by Millennials.
  • Millennials want banking services designed for their needs that are instant, simple, fair and transparent… which is why new providers are beginning to emerge.
  • For those not familiar with Moven, GoBank and Simple… take a look at what each has to offer.
  • The cultural divide between banks and FinTech companies is getting smaller for bigger banks, but remains high for regional and community banks.  Nonetheless, these banks are in a better position to collaborate and seriously consider new tools and products as the decision making cycle is considerably shorter then at large institutions.

Picked Up Pieces

While today was “just” a half day, some of the more salient points I made note of:

  • Per Jennifer Burke, a partner at Crowe, “proactively identifying, mitigating, and in some cases, capitalizing on these risks provides a distinct advantage to banks.”
  • In terms of building value, the ability for a bank to grow is as important as a bank’s profitability.
  • It was refreshing to be at a banking conference where talk about regulation was at a minimum; in fact, it seemed that the regulatory environment presents more of a distraction than it poses a threat to bank’s looking to grow.
  • The corollary to this point: competition from non-banks is higher then ever before.

To see what’s being written and said as we wrap up our time in New Orleans, I invite you to follow @bankdirector, @aldominick + #BDGrow15.

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Three Observations from the Bank Board Growth & Innovation Conference

Select news and notes from the first day of Bank Director’s annual growth conference at the Ritz-Carlton New Orleans.

By Al Dominick // @aldominick

I mentioned this from the stage earlier today… every January, Bank Director hosts a huge event in Arizona focused on bank mergers and acquisitions.  Known as “AOBA,” our Acquire or Be Acquired conference has grown significantly over the years (this year, we welcomed some 800 to the desert).  After the banking M&A market tumbled to a 20-year low in 2009 of just 109 transactions, it has gradually recovered from the effects of the crisis. In fact, there were 288 bank and thrift deals last year, which was a considerable improvement on volume of 224 deals in 2013.  As our editorial team has noted, the buying and selling of banks has been the industry’s great game for the last couple of decades, but it’s a game that not all banks can — or want to — play.  Indeed, many bank CEOs have a preference to grow organically, and its to these growth efforts that we base today and tomorrow’s program.

Key Takeaway

To kick things off, we invited Fred Cannon, Executive Vice President & Director of Research at KBW, to share his thoughts on what constitutes franchise value. While he opened with a straight-forward equation to quantify franchise value over time — (ROE – Cost of Equity) × Market Premium — what really stuck with me during his presentation is the fact that a logo does not create franchise value, a brand does.  As he made clear, it is contextual (e.g. by industry’s served, technologies leveraged and clients maintained) and requires focus (e.g. you can’t be all things to all people).  Most notably, small and focused institutions trump small and complex ones.

Trending Topics

Anecdotally, the issues I took note of where, in no particular order:

  • Banks must be selective when integrating new technology into their systems.
  • The ability to analyze data proves fundamental to one’s ability to innovate.
  • When it comes to “data-driven decisions,” the proverbial life cycle can be thought of as (1) capture (2) store (3) analyze (4) act.
  • You don’t need a big deposit franchise to be a strong performing bank (for example, take a look at County Bancorp in Wisconsin)
  • We’ve heard this before, but size does matter… and as the size of bank’s balance sheet progresses to $10 billion, publicly traded banks generate stronger profitability and capture healthier valuations.

Picked Up Pieces

A really full day here in New Orleans, LA — with quite a few spirited discussions/debates.  Here are some of the more salient points I made note of throughout the day:

  • Selling services to large, highly regulated organization is a real challenge to many tech companies.
  • Shadow banking? Maybe its time I start calling them “Challenger banks.”
  • CB Insight’s has a blog called “unbundling the bank” — to understand the FinTech ecosystem, take a look at how they depict how “traditional banks are under attack from a number of emerging specialist startups.”
  • A few sidebar conversations about Wells Fargo’s incubator program, which the San Francisco bank began last August… interest in how the program involves direct investment in a select group of startups and six months of mentoring for their leaders.

To see what’s being written and said here in New Orleans, I invite you to follow @bankdirector, @aldominick + #BDGrow15.

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Looking for Great FinTech Ideas

A fundamental truth about banking today: individuals along with business owners have more choices than ever before in terms of where, when and how they bank. So a big challenge — and dare I suggest, opportunity — for leadership teams at financial institutions of all sizes equates to aligning services and product mixes to suit core customers’ interests and expectations.

By Al Dominick // @aldominick

Sometimes, the temptation to simply copy, paste and quote Bank Director’s editor, Jack Milligan, is too much for me to resist. Recently, Jack made the case that the distinction between a bank and a non-bank has become increasingly meaningless.  In his convincing words:

“The financial service marketplace in the United States has been has crowded with nonbank companies that have competed fiercely with traditional banks for decades. But we seem to be in a particularly fecund period now. Empowered by advances in technology and data analysis, and funded by institutional investors who think they might offer a better play on growth in the U.S. economy than traditional banks, we’re seeing the emergence of a new class of financial technology – or fintech – companies that are taking dead aim at the consumer and small business lending markets that have been banking industry staples for decades.”

Truth-be-told, the fact he successfully employed a word like ‘fecund’ had me hunting down the meaning (*it means fertile).  As a result, that particular paragraph stuck in my mind… a fact worth sharing as it ties into a recent Capgemini World Retail Banking Report that I devoured on a tremendously turbulent, white-knuckling flight from Washington, D.C. to New Orleans this morning (one with a “minor” delay in Montgomery, AL thanks to this morning’s wild weather).

Detailing a stagnating customer experience, the consultancy’s comprehensive study draws attention “to the pressing problem of the middle- and back-office — two areas of the bank that have not kept pace with the digital transformation occurring in the front-office. Plagued by under-investment, the middle- and back-offices are falling short of the high level of support found in the more advanced front-offices, creating a disjointed customer experience and impeding the industry’s ability to attract, retain, and delight customers.”

Per Evan Bakker for Business Insider, the entirety of the 35-page report suggests “banks are facing two significant business threats. First, customer acquisition costs will increase as existing customers are less likely to refer their bank to others. Second, banks will lose revenue as customers leave for competitors and existing customers buy fewer products. The fact that negative sentiment is global and isn’t limited to a particular type of customer activity points to an industry wide problem. Global dissatisfaction with banks is likely a result of internal problems with products and services as well as the growing number of non-bank providers of competing products and services.”

While dealing with attacks from aggressive, non-bank competitors is certainly not a new phenomenon for traditional banks, I have taken a personal interest in those FinTech companies looking to support (and not compete with) financial institutions.  So as I set up shop at the Ritz-Carlton New Orleans through Wednesday for our annual Bank Board Growth & Innovation conference, let me shine the spotlight on eight companies that may help address some of the challenges I just mentioned. While certainly just the tip of the FinTech iceberg, each company brings something interesting to the table:

As unregulated competition heats up, bank CEOs and their teams need to continue to seek ways to not just stay relevant but to stand out.  While a number of banks seek to extend their footprint and franchise value through acquisition, many more aspire to build the bank internally. Some show organic growth as they build their base of core deposits and expand their customer relationships; others see the value of collaborating with FinTech companies.  To see what’s being written and said here in New Orleans, I invite you to follow @bankdirector, @aldominick + #BDGrow15.

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The Fight for Relevancy

I’m sure it is really simple for those not invested in the future of banking to write that CEOs, their boards and executive teams should cut branches and full-time employees to make their banks more efficient.  But I’m of the belief that you can’t save your way to long-term profitability and viability — and not everyone can be like Capital One and reinvent their business model from digital to analog on the fly.

Last October, Richard Fairbank, the Chairman and CEO of Capital One, expressed the following opinion on an earnings call: “Ultimately, the winners in banking will have the capabilities of a world-class software company. Most of the leverage and most of our investment is in building the foundational underpinnings and talent model of a great digital company. To succeed in a digital world (you) can’t just bolt digital capabilities onto the side of an analog business.”  Now, I am a big believer that many banks have immediate opportunities to expand what banking means to individual and business customers. Heck, I wrote as much to open a special supplement to Bank Director magazine that highlights a number of interesting technologies that have re-shaped the fortunes of banks across the U.S.  As you can see in the graphic above (produced for and by our team), the intersection of financial services with technology tools is immense.

Nonetheless, the interaction, communication, coordination and decision-making in regulated banks is vastly different than those of an up-and-coming technology company.  No matter how much both sides want to work with the other (to gain access to a wider customer footprint, to incorporate emerging technologies, etc.), the barriers to both entry and innovation are high.

Keep in mind that there has been an enormous shift in asset concentration and customer loyalty during the past two decades. Today, the ten biggest banks in the U.S. now have more assets than all of the other institutions combined. Concurrently, major consumer brands such as Apple and Google have emerged as significant non-bank competitors while “upstarts” like LendingClub and OnDeck jockey to provide loans to traditional bank customers.

So to stay both relevant and competitive, I believe a bank’s leadership team needs to develop a culture of disciplined growth that encourages creativity and yes, risk taking.  For a leadership team, this requires a combination of knowledge, skill and courage — all things we designed our annual Bank Board Growth & Innovation Conference at the Ritz-Carlton New Orleans to provide (*fwiw, this is a complement to our annual M&A conference — Acquire or Be Acquired).

In the coming days, I’ll be looking at how the processes of interaction, communication, coordination and decision-making in a regulated bank are vastly different than those of a tech firm.  Cleary, the fight for relevancy is on in the banking space… and to see what’s being written and said, I invite you to follow @bankdirector, @aldominick + #BDGrow15.