January 2014

Advanced Credit Underwriting: Determining Borrower Interest Rate Sensitivity

Underwriting borrower interest sensitivity

We monitor many banking schools and credit training programs and it is rare that we see anyone teach the analysis of a borrower’s interest rate risk position. For that matter, in hundreds of credit reviews that we see a year from a variety of banks, there is rarely a quantification of how rising or falling rates will impact credit risk.

How to Make A 15% ROE Making Loans at A 2% Spread (Or How To Get Out Of A Sinkhole)

Bank Lending

Listen, some bankers fear making loans below a 4% margin like I fear Florida sinkholes. To put that in context, I wear an avalanche transceiver whenever I am in the State. This makes bank meetings a little awkward, but gives me a fighting chance to be found when I get swallowed up. By the State’s own website, they refer to sinkholes as a “fact of life” which is why Florida is the only state where banks have to consult the “Sinkhole Clearinghouse” database before making a loan.

How The “Ecosystem” Will Change Banking

Bank Ecosystem

While the technology of the smartphone is revolutionary, it was Apple’s App Store that deserves much of the credit. It only took Apple five quarters to surpass Blackberry, the market leader at the time, in large part because iPhone users loved apps. Apps created an “ecosystem” which can be thought of a set of different programs, not only providing value to the user, but making the iPhone more valuable in itself, as well as creating a diversified revenue stream for Apple and millions of app developers.

Popular Events For Banks To Market Around For 2014

Bank Marketing

Banks are always in need of good marketing themes and promotion tie-ins. When marketing is paired with an event or a holiday it becomes even more effective. Promotions on bank website supported by keywords or in the branch supported by word of mouth, leveraging events can add 10% to 20% more marketing effectiveness. Certain holiday’s and events tend to lend themselves to bank promotions, while others do not. Holiday’s like MLK, Jr. Day, Valentines, Mardi Gras, St.

How To Test Your Bank’s Customer Value Proposition For the New Year

Bank Customer Value Proposition

Every January, we advocate taking another look at your value proposition to see if there are any changes that need to be made.

 

Part of the problem with the current state of banking is that it is hard to tell one community bank from another. Because of this fact, loans, deposits and other bank services have largely turned into commoditized products. In some cases, bank margins are lower than they are for bottled water. If retailers can charge up to $6.00 for water, surely a bank can differentiate itself.