It has been said that community banks are not doing enough to differentiate themselves and are not properly segmenting their markets. Furthermore, it has been pointed out that almost all community banks claim to compete on service, but the reality is that most banks do not measure their service delivery, do not reward employees on the service delivered, and are providing about the same level of service as most of their competit
One of the best lessons that we have learned when it comes to bank marketing is not every potential customer should be a customer. Of course, what that means is that at some point you have to tell a profitable customer that we are not the bank for them and make the introduction to a competitor. This is hard to admit, particularly when you see a customer with strong deposit balances and a healthy appetite for loans that really want to do business with you.
When it comes to setting a commercial loan’s maturity and amortization, banks tend to rely on tradition. Given tighter spreads and more competitive lending, it is more important than ever to have a working knowledge of how maturity, amortization, risk, loan structure and pricing interplay to produce the highest risk-adjusted return. As we have covered in the past balloon structures inject liquidity risk into the loan equation and often hurt profitability.
Let’s be honest, banks currently struggle turning themselves into sales organization. We know we can improve. The good news is that most bankers really care about the customer and strive to do the best by them. However, when it comes to understanding the sales process, there is much to be desired. Part of the issue is training bankers not to be sales people, but to be true financial advisors.
For U.S. banks, unlike common equity that derives its returns primarily through appreciation; preferred equity gives an investor a return largely in the form of a fixed dividend. Thus, when it comes to valuing a bank with preferred debt, the question comes up do you treat the capital as common or more like a debt instrument? Because the dividend is largely like a coupon on a holding company loan or other debt instrument, it seems natural to value preferred equity as debt.
Yesterday was the first anniversary of Apple Pay while the past 60 days saw the release of Android Pay and Samsung Pay. The strategic question comes up – which do you do if any? Before you answer that question ask yourself this one – how long do you want to be in business? Wait. Before you fire us off an angry email, we are not being flippant. It is important to understand your investment horizon, as if your bank plans on selling in the next five years, then why go through the cost and hassle of registering your cards on each platform.
Yesterdays’ article on branding loans generated many comments. The most common question we received is to give finite examples of how to create a unique product in the marketplace to garner above average pricing.
You brand your bank; why not brand your loans? The other day we attended a seminar on banking Millennials where a panel of Millennials was discussing how Millennials don’t believe the marketing hype like earlier generations did. We found this ironic as they sat there with Apple Watches, Stance socks (our favorite as well) and various other brands draped on their bodies in addition to the fact that all five were drinking bottled water despite a carafe right in front of each. Try selling bottled water to the Greatest Generation and you would be laughed out of the room.
BankUnited recently released their Vertical Rewards Checking Account and in doing so has sent a message to other bankers that the war for deposits will be fought not with certificates of deposit (CDs) or money market accounts, but with checking. Bankers should take notice because while you may not compete with BankUnited like we do, this product may be coming to your market. Even if it doesn’t make it to your footprint, it is important to understand how this product works and performs as it will likely shift the strategy of raising deposits going forward.
For years, regulators have talked about enterprise risk management (“ERM”). One component of every bank’s ERM is the concept of a clear credible challenge by the board of directors to the senior management of the bank. While there has not been clear guidance in this area, one area where boards can exercise credible challenge is on the subject of strategic direction and assessing management bias.
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