You have probably experienced this at your bank - You hold a shareholder meeting and of your 1,000 shareholders, only twenty people showed up and ten were directors, two were past employees and five were there for the free lunch. Your chairwoman shrugs at the turnout and then jokes that at least you don’t have any activist in the crowd. You all have a quick meeting, a good lunch and then get back to work. However, on the way back you just feel like there is something more. The reality is – you are missing something.
It has been said that the shareholder letter is up there with reading ingredients on the back of oatmeal and academic studies on mono-phase phosphates. In the spectrum of shareholder letters, bank letters happen to be on the snoozy side of yawnsville. Of course, it doesn’t have to be like that. Berkshire Hathaway has undoubtedly the best shareholder letter in corporate America. It is better than 80% of most novels and 90% of most financial text. It makes you laugh, cry and feel young all over again.
It comes as no surprise to the educated and insightful community banker that our customers do not care about our products and services. Wait, read on and don’t pass judgment yet! What we mean by that is that customers don’t care about the way we underwrite loans, our construction terms, our deposit rates or how we gather checks remotely. None of that matters to customers. Customers want their specific needs met effectively and completely – they are looking for solutions. Those needs may require a quick decisio
If you are looking to make best-in-class decisions, it pays to have a variety of best-in-class tools at your disposal. Oftentimes, a reason why banks don’t innovate more is because they lack the tools and experience to properly understand the risk and the return. Without a way to quantify the risk, stagnation occurs. As banks develop their risk management culture, it pays to have all managers conversant in the proper tools to manage risk.
Of all the sayings, “having your cake and eating it too” is perhaps the most moronic. Where did this saying come from and who is the clown that started it that wanted their cake, but didn’t want to eat it? Regardless, when it comes to reducing operating cost and keeping your customers happy, we have a way that banks can have their cake and a slice.
The Zen Checking Account Line Up
One problem with commercial loan portfolio due diligence is that there is no common underwriting standard between community banks. Mortgages, autos, consumer and other retail-type of loans tend to be more standardized since liquidity is greater. However, when it comes to commercial lending, the difference between banks can be wide. One bank’s “3” rated credit can be another bank’s “6.” While this is understandable between banks, this credit gap can even be found within one bank as different regions, branches and even lenders can propagate these systemic differences.
It’s hard to meet a banker today who doesn’t want to banter about the Federal Reserve’s next monetary step. Despite the talk of an imminent Fed hike for the last two years, it now seems right around the corner – or does it?
Indra Nooyi, Pepsi’s CEO, wanted to put more emphasis on design. She gave each executive a photo album and a mission to go capture designs that “inspire.” It was a simple assignment, but only a few managers completed the task and of those that did, half of those had their spouse do it for them. Those that did do it, just stuck with superficial changes such as changing the shape of their bottle, the label and the color of Pepsi’s blue.
In the Wall Street Journal, on Bloomberg radio or on CNBC, economists and pundits predict the future of the US economy. On any given day, in the same paper or show, various economists will be outspoken and confident about their predictions – their hubris is striking. One analyst will state that the S&P will continue to decline, another will state the opposite. One pundit will predict that the price of oil will fall, and a
Here is our quarterly report on banking industry trends and insights [link expired]. In a nutshell, banking improved by most measures as the average bank became more profitable. In a somewhat rare occurrence, lending got safer, yet loan pricing on new production improved. For the industry, the average return on equity (ROE) increased from 8.1% to 9.2%. Banks in the $5B to $10B asset range put in the largest improvement, followed by banks over $25B. Community banks held their own producing an 8.5% ROE, up from 8.2% last quarter.
- 1 of 2
- next ›