Look At Who Is Attending Acquire or Be Acquired

In just 20 days, we raise the lights on our 23rd annual Acquire or Be Acquired Conference.  This is Bank Director’s biggest event of the year, one primarily focused on banking’s “great game” — mergers and acquisitions.  My team has spent considerable time and energy developing a spectacular event focused on growth-related topics that range from exploring a merger to preparing for an acquisition; growing loans to capturing efficiencies; managing capital to partnering with fintech companies.  To see the full agenda, click here.

Widely regarded as one of the banking industry’s premier events, we have more than 1,000 people registered to attend AOBA later this month — an all-time high.  We couldn’t do this alone, and over the course of these 2 ½ days, executives from many of our industry’s leading professional services firms and product companies share their perspectives on “what’s now” and “what’s next.”  I invite you to take a look at all of the corporate sponsors joining us:

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As I shared in a recent post, bank executives and their boards face some major issues without clear answers.  Before heading out west, I’ll share more about the banks (and 660+ bankers) joining us at the JW Marriott Phoenix Desert Ridge Resort & Spa.  Until then, I invite you to learn more about the companies supporting this conference by hopping over to bankdirector.com. To follow the conversations happening around this conference on Twitter, I’m @aldominick and we are using #AOBA17.

Three Observations From Bank Director’s 2015 Acquire or Be Acquired Conference (Tuesday)

News and notes from the final day of Bank Director’s annual Acquire or Be Acquired conference.

Key Takeaway

As always, the one constant in life is change.  Right now, with deflation in the Eurozone (is it time to bid Greece goodbye from the EU?), declining oil prices and the sluggish growth of the U.S. economy, optimism about banking’s future is tempered by present uncertainties.  As we heard from KBW, a handful of factors have contributed to the slower pace of our economic recovery:

  • Resetting of global GDP growth expectations;
  • Europe nearing closer to deflation;
  • Japan expanding its stimulus spending;
  • Modest wage growth; and
  • Conservative consumer and small business confidence.

Nonetheless, there is a true sense of optimism permeating the conference here at The Phoenician… especially in terms of the future of community banking.

Trending Topics

A spirited half-day of conversations and presentations that ranged from capital raises to digital growth opportunities.  With respect to trending topics, I made note of the following: to drive growth, the biggest banks are exploring opportunities in three areas: (1) deals for smaller product/technology/capability based companies, (2) analytics and (3) digital; as I noted on Sunday, bank M&A deals per year (as a % of total banks) are at historically high levels — and we see banks with strong tangible book value multiples dominating the M&A space; finally, there is a widening gap in terms of buyer valuations meeting seller expectations.

Picked Up Pieces

I made note of the following this morning:

  • Google’s partnership with Lending Club came up early and sparked quite a few sidebar-type conversations;
  • New skills, better analytics is where bigger banks are struggling the most.
  • Per Josh Carter at PwC, mobile phones, wearables and integrated devices (car, shopping cart, item RFID tags) have barely scratched the surface in terms of how they will shape our lives.
  • Several presenters noted the multi-charter bank model is under pressure.
  • Looking ahead, bank stocks may struggle to outperform the broader market if unable to meet earning-per-share (EPS) expectations.
  • By extension, if the Federal Reserve does not raise interest rates, EPS estimates will be at risk for negative revisions.

I will post a recap video tomorrow morning on About That Ratio and you can use the hashtag #AOBA15 to read through the last three days tweets.  Now, it is time for me to head out to the golf course to shake off the rust at our annual golf tournament.

The Single Greatest Constraint on Growth

With the revenue pressures facing the banking industry being some of the most intense in decades, banks need to think more constructively about their businesses. At the same time, changing consumer behavior could drive the industry to reallocate its resources to less traditional growth channels in order to stay ahead.  In my view, the words of an English naturalist reflect the single greatest constraint on growth today.

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Powerful Forces

One of our long-term corporate sponsors, PwC, recently shared their thoughts on the future of the retail banking industry.  In their view, “powerful forces are reshaping the banking industry, creating an imperative for change. Banks need to choose what posture they want to adopt – to lead the change, to follow fast, or to manage for the present. Whatever their chosen strategy, leading banks will need to balance execution against… critical priorities and have a clear sense of the posture they wish to adopt.”  If you, like our friends from PwC, are joining us in New Orleans later this week to dive into this very topic, their compelling “Retail Banking 2020” report might make for good airplane company.

Looking Back in Order to Look Ahead

Last year, John Eggemeyer, a Founder and Managing Principal of Castle Creek Capital LLC, helped me to kick off our inaugural Growth Conference.  As a lead investor in the banking industry since 1990, he shared his views on our “mature industry,” That is, banking follows a historic pattern of other mature industries: excess capacity creates fierce competition for business which in turn makes price, not customer service, the key differentiator.  While offering myriad thoughts on what makes for a great bank,  John did share some hard-to-swallow statistics and opinions for a crowd of nearly 200 bankers and industry executives:

  • Publicly traded banks from $1 billion to $5 billion in assets saw their stock values rise at about half the rate of the broader market as a whole since early 2009.
  • Of the 300 or so publicly traded banks in that size range, only about 60 of them traded at their pre-recession price multiples.
  • In the last 40 years, bank stocks always followed the same pattern in a recession: falling in value quicker than the rest of the market and recovering quicker.

I share these three points to provide context for certain presentations later this week.  Some build on his perspectives while others update market trends and behavior.  Still, an interesting reminder of where we were at this time last year.

Getting Social-er

Yesterday, I shared the hashtag for The Growth Conference (#BDGrow14).  Thanks to our Director of Research — @ehmccormick — and Director of Marketing — @Michelle_M_King — I can tell you that nearly 30% of the attending banks have an active twitter account; 78% of sponsors do.  On the banking side, these include the oldest and largest institution headquartered in Louisiana — @IBERIABANK, a Connecticut bank first chartered in 1825 with over $3.5 billion in assets — @LibertyBank_CT and a Durham, NC-based bank that just went public last month — @Square1Bank.  On the corporate side of things, one of the top marketing and communications firms for financial companies —@wmagency, a tech company that shares Bank Director’s love of orange — @Fiserv and a leading provider of personal financial management — @MoneyDesktop join us.  Just six of many institutions and service providers I’m looking forward to saying hello to.

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More to come — from New Orleans, not D.C. — tomorrow afternoon.

Since You Can’t Own a Car Dealership

As my colleague Jack Milligan writes in our 2nd quarter issue of Bank Director magazine, just because a bank can’t own a car dealership doesn’t mean there isn’t “enormous flexibility in determining a bank’s strategy.” Curious what this means? Read on.

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A Sneak Peek at the Core Revenue Champs

Each year, Bank Director magazine looks at all U.S. banks and thrifts to identify the strongest growth banks. We rank the top performers across four separate categories: core deposits, core noninterest income, net loans and leases and the most important, core revenue. Since the magazine mails today, I thought to offer a sneak peek of the results:

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What I find interesting about the top two banks on this very strong list: both Customers Bank and EverBank Financial designed their business models around technology from their very beginnings.

Find Your Balance

As I read through an advance copy of the issue, it strikes me that many business areas that historically provided revenue growth are simply not growing fast enough to overcome new capital and regulatory requirements.  In this light, you can understand why many say times couldn’t be more challenging for growth in community or regional banking. The corollary to this? Balancing organic and external growth is a key focus area for bank management and boards.

Increasingly, I hear that growth-focused banks are considering (or implementing) strategies that create revenue growth from both net interest income and fee based revenue business lines — think government guaranteed lending, asset based lending, leasing, trust and wealth management services. Clearly, as interest margins and loan volumes remain subject to compression and intense competition, the “optimization” of fee-based revenue is becoming pivotal in enhancing shareholder value.

‘Sup Big Easy

True, a number of banks seek to extend their footprint and franchise value through acquisition. Yet, 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 leverage product innovation or focus on their branch network. I bring these approaches up in advance of next week’s Growth Conference at the Ritz-Carlton, New Orleans. We designed this event to showcase strategies, structures, processes and technologies that a bank’s CEO and board might consider to fuel their own growth.

Unlike trade shows and other events, we limit participation to a financial institution’s key officers and directors to ensure those joining us are not just committed to distinguishing their performance and reputation, but also are appropriate peers to share time and ideas with. From companies like StrategyCorps, Ignite Sales and VerifyValid to PwC, Fiserv and IBM, we have a tremendous roster of companies joining us in Louisiana to share “what’s working” at the myriad banks they support. As I’ve done for our other events (e.g. the sister conference to Growth, Acquire or Be Acquired), I’ll be posting a number of pieces next week from the Crescent City and invite you to follow along on Twitter via @aldominick, @bankdirector and using #BDGrow14.

Aloha Friday!

FI Tip Sheet: Is 2014 the Year of the Bank IPO?

Good things come in threes — like insightful/inspiring meetings in New York, Nashville and D.C. this week.  By extension, keep an eye out for a Sunday, Monday and Tuesday post on About That Ratio.  Yes, I’m heading to Chicago for Bank Director’s annual Chairman/CEO Peer Exchange at the Four Seasons (#chair14) and plan to share my thoughts and observations on issues like strategic planning, risk management and leveraging emerging technologies each day.  Finally, I hope the three points I share today (e.g. a look at what the future holds for branches to a rise in public offerings) prove my original sentiment correct.

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I’ve been surprised… by the # of conversations I’ve had about branch banking.

With many of the mega and super-regional banks focused on expense control, I find myself talking fairly regularly about how these institutions are taking a “fresh look” at reducing their branch networks.  Typically, these conversations trend towards well-positioned regional and community banks — and how many now look to branch acquisitions as low risk and cost effectives ways to enter a new market or bolster an existing market.  I expect these conversations to continue next week in Chicago — but thought to share today as it again came to the fore earlier this week in NYC.  While there, I had a chance to catch up on PwC’s latest offerings and perspectives.  Case-in-point, one of their current research pieces shows that, despite the emergence of new competitors and models:

“the traditional bank has a bright future – the fundamental concept of a trusted institution acting as a store of value, a source of finance and as a facilitator of transactions is not about to change. However, much of the landscape will change significantly, in response to the evolving forces of customer expectations, regulatory requirements, technology, demographics, new competitors, and shifting economics.”

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The two images above come from an information-rich micro-site (Retail Banking 2020) PwC shares.  Personally, I found these statistics fascinating and foreshadow my second point about creative approaches to win new business.

I’ve been thinking about… fin’tech companies + their “solutions.”

Here, I want to give major props to our friends at the William Mills Agency in Atlanta.  Their annual “Bankers as Buyers” report shares ideas, concepts and research about financial technology from 30 of the top influencers in the country and those forces driving change today.  This year’s report lays out trends for the coming year, including:

  • Branch Network Transformation;
  • Mobile 3.0;
  • Big Data Drives Marketing & Fights Fraud;
  • Payments Technology Stampede;
  • Banks Focus on Underbanked and Wealthy; and
  • Compliance Strategies.

Take a look at their work and download the free report if you’re interested.

I’ve been talking about… the number of banks going public.

Is 2014 the year of the bank IPO? According to Tom Michaud, the president and CEO of Stifel Financial’s KBW, it just might be.  I had a chance to get together with Tom earlier this week and he got me thinking about how many are going to pursue a public market to raise capital versus doing so privately.  He shared the story of Talmer Bancorp (TLMR), which went public on Valentine’s Day.  When it did, it marked the biggest bank IPO in three years (yes, KBW’s Banking & Capital Markets teams completed the $232 million Initial Public Offering, acting as joint bookrunner).  As he shared their story with me, it became clear that as more banks go public, we will see more buyers entering into the M&A market — since most bank deals are being done with stock these days.  It strikes me that going public presents an alternative for private banks… rather than sell now, they might find a more receptive market should their story be a good one.

Aloha Friday!

Three out of Four Say…

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Last week, I shared that Cullen/Frost acquired another institution in Texas.  A stalwart of community banks, many analysts and investors cite their strength as proof that M&A isn’t a necessity to grow one’s business.  Still, organic growth has yet to return to the degree to which was hoped for by many other bankers at this point.  So with apologies to Deloitte, the following three points from members of the accounting world’s “Big Four” focus on the strategies some might consider to build their franchise value without requiring an acquisition.

(1) KPMG’s John Depman writes about the “unprecedented change afoot in the banking industry.”  In his view, technology is rapidly evolving and it’s changing consumer expectations about how banks should be serving them.  He carries this message throughout his “Community Banks That Fail to Leverage Technology May Become Obsolete” piece that is up on BankDirector.com.  According to John, community banks have been slower to embrace technology as a means to interact with and serve customers.  In doing so, they risk becoming obsolete.  To this end, he shares a number of key issues that directors and boards need to consider and subsequently work with senior management to address.  These range from “customer loss vs. investment return” to evaluating bank branch strategies.  Ultimately, “the model that defined our industry for generations has now been turned on its head.  The road to transforming your community bank won’t be short.  But, it’s a road that must be taken.”

(2) Keeping to this transformation theme, PwC’s Financial Services Managing Director, Nate Fisher, highlights how banks can align their pricing structure by using data from customer preferences, purchasing patterns and price sensitivity.

 

(3) Finally, banks continue to report increases in mobile banking usage, at least, according to a July 30th piece that ran in American Banker’s “Bank Technology News.”  There, they recognize the latest “Mobile Banking Intensity Index” which shows how features like mobile check deposit continue to be adopted quickly.  This lines up with a number of tweets I’ve recently seen from Ernst & Young (“EY”).  Some relate to the banking industry coping with the challenges of the mobile money ecosystem.  Others refer to the strategies that are emerging, and potential pitfalls to be avoided “in a landscape where competitors include businesses (telecoms and tech firms, for instance) that until recently had nothing to do with financial services.”  According to EY, in 2001, there was only one mobile payment system in the market. Today, there are 150 in everyday use and 90 more in development. Wow…

Aloha Friday!