Do You Know These 3 Cs of Banking?

Quickly:

  • When it comes to talk about bank mergers and acquisitions, It has been written that the questions rarely change — but the conversations prove irresistible.

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech.

PHOENIX, AZ — If you’re with us here at the Arizona Biltmore for Bank Director’s annual Acquire or Be Acquired Conference, you’ve heard that banks with low‐cost core deposits continue to attract interest from acquirers.  So as banks wrestle with increased funding costs, that observation sparked an idea about what constitutes the “three Cs” of banking today:

  1. Compliance
  2. Cost Control
  3. Consolidation

For instance, having good on-going relations with one’s regulators is hugely important. In fact, I heard several prominent attorneys share that regulatory risk remains the greatest obstacle to completing an M&A deal.  So having the bank in position to act quickly and confidently when an opportunity arises is a major advantage in today’s competitive M&A environment.  I take this to mean no enforcement actions, satisfactory CRA, good HCR results, etc.

As was discussed yesterday afternoon, when an acquirer can present a credible narrative that a potential deal is consistent with a well-considered strategy — and that the company has the infrastructure appropriate to the new organization, you find a well received merger.

In terms of consolidation, we saw a number of presentations note the 261 bank M&A deals, worth an aggregate $26.38 billion, announced in 2017.  As a point of reference, 241 deals were announced — worth an aggregate $26.79 billion — in 2016.  According to S&P Global Market Intelligence, the median deal value-to-tangible common equity ratio climbed significantly in 2017 to 160.6%, compared to 130.6% for 2016.  Last December alone, 32 deals worth a combined $1.84 billion were announced and the median deal value-to-tangible common equity ratio was 156.5%.

Throughout the fourth quarter, there were 74 bank deals announced in the US, which was the most active quarter since 83 deals were announced in the fourth quarter of 2015. However, last quarter’s $4.4 billion aggregate deal value was the lowest since the third quarter of 2015, which totaled $3.43 billion.

These are by no means the only Cs in banking.  Credit, core technology providers, (tax) cuts… all, huge issues.  So along these lines, I made note of a few more issues for buyers, for sellers — and for those wishing to remain independent.  Take a look:

If you are interested in following the final day of the conference via our social channels, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, or search #AOBA18 to see what is being shared with (and by) our nearly 1,200 attendees.

Ranking the 10 Biggest Banks

Quickly:

  • Bank Director’s year-long Ranking Banking study focuses less on current profitability and market capitalization & more on how the top 10 banks in the U.S. are strategically positioned for success.

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech

WASHINGTON, DC — It is with tremendous pride that I share the results of Bank Director’s year-long study on America’s 10 largest banks.
  As my colleague, Bill King, wrote to open our inaugural Ranking Banking, we felt that a truly comprehensive analysis of the largest banks was missing, one that includes not just profitability or customer satisfaction ratings, but also compiles numerous measures of strength and financial health — a project to rank each of the largest banks for each major line of business based on qualities that all big banks need.

For instance, we decided to rank banks for branch networks, mobile banking, innovation and wealth management. We analyzed corporate banking and small business lending. We interviewed experts in the field and did secret shopper visits to the biggest banks to find out what the customer experience was like.  Unlike other rankings, we even included complaints lodged with the Consumer Financial Protection Bureau as one of many customer satisfaction metrics that we analyzed.  In other words, there is little about the biggest banks in the nation that we left out.

So who came out on top?

JPMorgan Chase & Co. topped Bank Director’s 2018 Ranking Banking study.

In fact, Chase won five of the ten individual categories and ranked near the top in three more, and was judged by Bank Director to be the most worthy claimant of the title Best of the Biggest Banks.  The individual category winners are:

Best Branch Network: Wells Fargo & Co.

Despite its well-publicized unauthorized account opening scandal, Wells Fargo topped the branch category by showing the best balance of deposit growth and efficiency, and scored well on customer experience reports from Bank Director’s on-site visits.

Best Board: Citigroup

In ranking the boards of directors of the big banks, Bank Director analyzed board composition by factors such as critical skill sets, diversity, median compensation relative to profitability and independence. Citigroup’s board best balanced all components.

Best Brand: JPMorgan Chase & Co.

Chase and runner-up Capital One Financial Corp. stood out for their media spend as a percentage of revenue, and both exhibited strong customer perception metrics.

Best Mobile Strategy: JPMorgan Chase & Co.

Chase has been successful in driving new and existing customers to its mobile products, leading to an impressive digital footprint, measured through mobile app downloads. The bank’s app also scored well with consumers.

Best Core Deposit Growth Strategy: BB&T Corp.

BB&T had a low cost of funds compared to the other ranked banks, and its acquisitions played a strong role in its core deposit growth, which far surpassed the other banks in the ranking.

Most Innovative: JPMorgan Chase & Co.

Chase most successfully balanced actual results with sizeable investments in technological innovation. These initiatives include an in-residence program and a financial commitment to the CFSI Financial Solutions Lab. Chase has also been an active investor in fintech companies.

Best Credit Card Program: JPMorgan Chase & Co.

Chase barely edged out fast-growing Capital One to take the credit card category, outpacing most of its competitors in terms of credit card loan volume and the breadth of its product offering. Chase also scored well with outside brand and market perception studies.

Best Small Business Program: Wells Fargo & Co.

Wells Fargo has long been recognized as a national leader in banking to small businesses, largely because of its extensive branch structure, and showed strong loan growth, which is difficult to manage from a large base. Wells Fargo is also the nation’s most active SBA lender and had the highest volume of small business loans.

Best Bank for Big Business: JPMorgan Chase & Co.

Big banks serve big businesses well, and finding qualitative differences among the biggest players in this category—Chase, Bank of America and Citigroup—is difficult. But Chase takes the category due to its high level of deposit share, loan volume and market penetration.

Best Wealth Management Program: Bank of America Corp.

With Merrill Lynch fueling its wealth management division, Bank of America topped the category by scoring highly in a variety of metrics, including number of advisors (more than 18,000 at last count) and net revenue for wealth and asset management, as well as earning high marks for market perception and from Bank Director’s panel of experts.

FWIW…

The 10 largest U.S. retail banks play an enormously important role in the nation’s economy and the lives of everyday Americans. For example, at the end of 2016, the top 10 banks accounted for over 53 percent of total industry assets, and 57 percent of total domestic deposits, according to the Federal Deposit Insurance Corp. The top four credit card issuers in 2016—JPMorgan Chase & Co., Bank of America Corp., Citigroup and Capital One Financial Corp.—put more than 303 million pieces of plastic in the hands of eager U.S. consumers, according to The Nilson Report.

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