Its Aloha Friday

Cherry blossoms in DC
An example of organic growth in Chevy Chase D.C.

Earlier this week, as part of Bank Director’s annual Bank Chairman/CEO Peer Exchange, I was lucky enough to spend time with key leaders from 40+ community banks averaging nearly $900M in asset size. As I reflect on various growth-focused conversations I had with CEOs of NASDAQ-listed banks, I think I’ve found a common thread. Each person runs an institution profitable enough to make acquisitions — all while maintaining adequate capital ratios.  The interesting part (for me at least) concerns the strategies these executives set to build their brand and tactics put in place to “organically” grow their franchise.  As our industry continues to rally back from the past few years of pessimism, it really is fun to hear success stories.  So what follows are three thoughts from this week that builds on my time at the Four Seasons in Chicago.

  • While M&A offers immediate growth to the acquirer, I’m hearing that “stocking the bank for talent” is a real long-term challenge. While a bank’s CEO and Chairman must work even more closely to drive bottom line performance while enhancing shareholder value, I left Chicago convinced this team must more aggressively identify — and groom — the next generation of bank leadership. Without the big banks providing management training like they once did (an unintended pipeline of talent for community banks), its time to get creative. For example, while most at our event appreciate the need to get mobile, few community banks have the senior strategist on hand to do so right now. While that opens the door to outside advisors to support an institution, it does present longer term dangers as customers expect access to their banks sans branch or ATM use.
  • Keeping on the tech-to-grow theme, I read an interesting “big data,” bank-specific piece by McKinsey on my way home to D.C.  Personally, I’ve been interested in the various tools and tactics banks employ to analyze their massive amounts of data to detect/prevent fraud, devise customer loyalty plans and proactively approach consumers. This overview, complete with video, touch on these points and show how some are using big data and analytics to sharpen risk assessment and drive revenue.

Aloha Friday to all, especially my niece and sister-in-law on their birthdays.

A #FF-Inspired Financial Roundup

Checking in from St. Louis, the “Gateway to the West”

A somewhat abbreviated Friday Follow-inspired post (coming to you from the great state of Missouri). On this Good Friday, I’m keeping things simple and sharing “just” three things I learned this week.

  • Of the news this week, Senator Tim Johnson’s announcement that he will not seek re-election in 2014 is especially noteworthy.  Why?  Well, the Democrat from South Dakota chairs the powerful Senate Banking Committee.  His departure, according to this report from the Wall Street Journal, sets the stage for a hotly contested race to succeed him.  This should interest many bank executives; “while he is regarded as sympathetic to the concerns of financial firms that operate in his home state, including community banks, Mr. Johnson has also fought GOP attempts to roll back or water down portions of the Dodd-Frank financial overhaul law.” I wonder if the next chair will push for legislation to breakup the big banks as the committee has discussed?  As you can read in the American Banker (subscription required), guessing has already begun.
  • While I’d like to move off the topic of legislation and regulation, our own Chairman forwarded a client alert from the law firm of Goodwin Procter that kept my attention on rules and procedures.  The title, Nasdaq Proposes Rule Requiring Internal Audit Function at All Listed Companies, says a lot.  As you dig in, you’ll see this would go into effect by year-end.  From a bankers point-of-view, financial institutions that are publicly traded already face the pressure of doing more with fewer resources.  Every business function, including internal audit, is expected to bring value to an institution.  So, much like the Senator’s announcement, this proposed rule is one to watch.
  • Finally, on the payments front, there’s been a lot of talk about the mobile consumer and his/her mobile wallet.  For example, how Google Wallet poses a threat to big banks that make $$ off of card products.  Yes, mobile devices have increasingly become tools that consumers use for banking, payments, budgeting and shopping. However, in this WSJ article (Consumer Using Phones to Bank, but Not Buy) we’re told “Americans are increasingly using their phones to avoid a trip to the bank, but they still have little interest in having mobile devices replace their wallets.”  The piece builds on the results of a Federal Reserve survey released on Wednesday.  The Fed finds the adoption of various tools isn’t as robust as one might be led to believe.  If you have the time, it might be worth downloading the Fed’s results.

Aloha Friday!

Snowquester’d

The White House on 12/18/09
My attempts at photography: the White House on 12/18/09…

Summary: Yes, it’s snowing in the DMV… no, this picture of the White House doesn’t capture today’s totals just yet.  Nonetheless, the run on gas, food and firewood started early yesterday.  So what better time to post something new to About That Ratio than with the snow coming down and the power and wi-fi still on?

I’ve already touched on “Rebooting the Bank;” with today’s piece, I’m taking a look at “rebooting the branch.”  Whereas Brett King inspired my previous entry, credit for today’s falls to PwC.

Recently, I’ve had the chance to talk with several of the firm’s partners about the rise of the digitally driven consumer and commensurate high-cost infrastructure of physical banking locations.  I believe we’re in agreement that if the branch model stays on its current course, it will become a financial burden to banks; ultimately, cutting deep into cross-channel profitability.  So today, I thought to share some information produced by PwC that looks at reinventing branch banking in a multi-channel, global environment.

Yes, the branch of the future has a critical place in banks’ overall channel strategy.  However, in its December “FS Viewpoint,” the professional services firm cites the cost of a branch transaction being approximately 20x higher than a mobile transaction… and more than 40x higher than an online one.  Consequently, banks are beginning to adopt a mix of the following five branch models in order to compete and improve their ROI:

  1. Assisted self-service branches that cater to retail and small-business customers on the go with high-function kiosks;
  2. In-store and corporate branches; for example, in grocery stores and corporate office buildings;
  3. Full-service branches that provide one-stop banking (sales and service) to retail and small-business customers who prefer privacy and face-to-face interactions;
  4. Community centers that have a smaller footprint than traditional branches; and
  5. Flagship stores that deliver sales and advisory expertise while showcasing emerging capabilities to sophisticated customers.

The logic behind a mixed approach?  It increases the bank’s geographic relevance to consumers and balances customer needs, revenue opportunities and cost to achieve growth.

Anecdotally, I’ve recently talked with two CEOs, Ray Davis from Umpqua and Stephen Steinour from Huntington, about their branching strategies in advance of keynote speeches they’ve made at our Acquire or Be Acquired and Lending conferences.  It strikes me that when banks like theirs assess a prospective branching opportunity, they deliberate on things like:

  • How do you develop specific financial criteria for measuring branch performance;
  • How do you decide whether the best path to building customers is adding branches, or operating with a more centralized marketing strategy; and
  • What are the advantages — and potential pitfalls — of growing a branch network.

So as the snow continues to fall outside, I’m digging deeper into PwC’s perspectives.  As a “bonus” to the white paper referenced about, let me also share a video from the firm “Look Before You Leap: Analyze Customer and Business Impact Carefully Before Implementing Product Change.”  While the title is a mouthful, the message, pretty succinct.

Friday Fun

Below are three stories related to the financial community that I read/watched/heard this week… An added bonus? After this sentence, About That Ratio is 100% free of any mention of today’s nonsensical sequester.

(1) So, the IPO market for banks is ringing? This week, McKinney, Texas-based Independent Bank Group (the parent of Independent Bank) went loud with its plans to raise up to $92 million in an initial public offering. The bank plans to use the proceeds from the IPO to, surprise, surprise, repay debt, shore up its capital ratios for growth & acquisitions and for working capital.  This filing comes only a few weeks after ConnectOne in NJ (CNOB) closed its previously announced offering of 1.6M shares of common stock @ $28/share.  Good to see…

(2)… and with Independent Bank’s news, now might be time to take a read through this brief overview of the JOBS Act put out by the attorneys at MoFo.  Why?  A centrepiece of the Act is its new IPO on-ramp approach…

(3) On the non-IPO tip, check out this cool/intuitive infographics for tech trends posted by NASDAQ to its Facebook page yesterday afternoon.  Who said social media + banks ain’t quite as simpatico as they might be…

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Aloha Friday to all!

Does Banking Need a Re-boot?

Now that I’ve baited you with the headline, let me tie it to the opinions of Brett King (who, in full disclosure, we just confirmed as a speaker at Bank Director’s upcoming Growth conference at the Ritz-Carlton in New Orleans).

Shawmut HD.001

A history lesson for those non-Bostonians reading today’s post.  Shawmut Bank was established in Boston in 1836 and its logo, the stylized bust of Chief Obbatinewat — seen above — became widely recognizable in the Greater Boston area over the next 150 years.  Heck, we had one in our house!  Sadly, the name and logo were retired in 1995 as a result of the merger of Shawmut and Fleet.  But for me — and many others I’ve met (hello Bank of the West’s CEO) — “the Chief” still inspires a smile and a story.

Robert Parrish -- #OO
Robert Parrish — #OO

In my last post, I wrote that its not easy for a bank to build a strong brand.  Still, as some are finding, the rewards can be immense.  So I bring up “the Chief” (not to be confused with the equally awesome Robert Parish who dominated the paint for the Boston Celtics) as an example of a formerly strong brand that still stirs emotions and memories.  It also provides a tie into what I’ve been reading of Brett’s in terms of building a “sticky” customer experience and developing a multi-channel distribution strategy.

Admittedly, his “BANK 2.0” book reminded me of many I read while in the IT space.  For example, those authored by Clay Shirky; at least, in terms of crowdsourcing, “disruptive” customer behaviors, technology shifts and new business models.   But as Brett focuses on our financial community, I’m eager to crack open his “BANK 3.0” to see what he thinks might redefine financial services and payments.  I’m particularly interested in his POV with respect to:

  • Where social media might shine a light on pricing, processes and heretofore obtuse policies;
  • How “customer advocacy” is killing traditional brand marketing; and
  • The growth of the ‘de-banked’ consumer who might not need a bank at all.

I’m always interested in hearing who’s “doing it right” in order to learn and share their stories.  So I ask: in addition to Brett’s ideas, any suggestions for other authors, entrepreneurs, innovators, etc. worth a follow/read?  Hit me up on Twitter or feel free to leave a comment below.  I’ll re-post later this week as part of my “Friday Follow” inspired column.

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FWIW, the Growth Conference focuses on how a bank’s board can become actively involved in building the bank – in securing customers, identifying lending opportunities, promoting the bank in the community, etc. Its a complement to our annual M&A conference, Acquire or Be Acquired, which I covered in detail on my DCSpring21 blog last month.