Tag: Profitability

How To Properly Price and Structure An Extendable Commercial Loan

Extendable Loan Products

In the attempt to win more business, banks sometimes offer what is commonly referred to as an “extendable,” “flex,” or “structural flex” commercial loan in order to give the borrower more flexibility. The option allows a borrower to move out their maturity date and allows more flexibility. While this structure is a popular way to win business, some banks may be inadvertently increasing their credit risk. In this article, we review the structure and look at the right, and wrong way to structure the extendable loan.

 

Packaging Prepaid Payroll Cards in Commercial Account Bundle

Prepaid payroll cards

Banks that are moving away from being transactional have recently been promoting more bundled accounts. For example, banks on their game actively market a high-net-worth elite checking product to the principals of their commercial accounts and commercial account packages to their high net worth business owners. This tactic can dramatically increase both new account growth and lifetime value.

How to Defend Existing Banking Relationships

Lenders typically are thrilled when they bring new customers to the bank. However, some of your most profitable customers are already at the bank.  Bankers are often surprised that, all else being equal (credit quality, loan and deposit size, etc.), existing relationships are more profitable than new relationships.  While part of most lenders’ responsibilities is business development, retaining and enhancing existing accounts is the most important and efficient way to boost your portfolio’s return on assets.

Who Are The Best Customers At Your Bank?

Finding Good Bank Customers

Unfortunately, most banks have no idea the answer to the title question. It is actually worse than that - most bankers THINK they know who their best customers are. The worst of all is most bankers can’t even agree on what a “good” customer looks like. If the bank cannot agree on what constitutes a good customer then how can you ever expect to get more of them? If this seems like a trick question, give it some thought. Chances are, you are like most bankers.

This Is Why Your Bank Should Review Your Deposit Fees

Managing Bank Fees

If the Federal Reserve does make a change in their target Fed Funds and Reserve rate on Thursday it will have many banks scrambling to take another look at their rates on deposits and their own asset-liability positions as it pertains to how fast their loans will reset (given floors, fixed rates, etc.). Unfortunately, few banks will stop to look at their fee structure on their deposit accounts. Considering that deposit fees can compose 70% of a bank’s fee income, this could be a mistake, especially because fee income streams are also interest rate sensitive.

Data Analytics: How Cell Phone Use Affects Credit

Bank Predictive Analytics

Daniel Björkegren, an economist at Brown University in Providence, released research that shows that banks can predict how likely someone was to pay back a loan based on cell phone call metadata. After analyzing data from 3,000 borrowers from a bank in Haiti — the number of calls, the length, frequency and who was called, Björkegren found the bank can reduce consumer loan defaults by 43 percent.

 

Why Your Customers May Really Want Shorter Branch Hours

Figuring out what customers really want

At a recent financial conference, after we presented on the bank customer experience, an attendee joked that she wished her bank was more customer friendly and had longer branch hours including be open on Saturdays. The funny part is that customers don’t want longer branch hours.

 

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