A recent survey from the CFA Institute caught our attention on why wealth management clients leave. 47% of the respondents said they left because of the poor portfolio performance. That makes sense. But, do you know what the second highest reason for leaving your wealth manager was? Communication. 43% of the respondents left because of the lack of communication. That got us thinking about how we can improve communication with our commercial customers.
Banker To Banker
Last month, right after lunch, the borrower came into the bank to close his company’s owner-occupied commercial loan for $5mm – it happened to be March 21st. The borrower closed the loan, locked in a 4.50% rate for 10-years, shook hands, smiled and walked out the door. The Chief Lender and the CFO walked over to the business development officer and congratulated him on a job well done. High-fives ensued, and everyone was happy. Should they be? The Bank just lost $238k in one day, and the worst part is, no one knew the difference except the borrower.
One way to increase your efficiency ratio is to cut costs, but another way is to increase output. It is in the vein that our bank decided to add to our cost and hire a professional project management team to get more stuff done. It has worked like a dream as we now can take on more projects, get them done in less time and have a methodology to improve the process of project management.
As we analyze commercial real estate (CRE) capital allocations this morning, we can’t help but draw similarities to last night’s second season opener of Westworld – in our opinion, one of the best television shows ever produced. A common rubric on the show is the Romeo and Juliet quote, “These violent delights have violent ends” and it fitting to any bank’s CRE analysis. As community banks, we can’t stay away from CRE, but we know it is dangerous at some point.
Many banks work hard to have a low-cost deposit base only to undermine their efforts. One of the biggest mistakes banks make is to advertise an above market rate thereby not only shortening deposit duration and increasing negative convexity for that one account, but for the whole product offering.
Loan pricing is both an art and a science. While there are three primary ways to price bank products, one methodology is consistently used by top performing banks. Since we talk and see the pricing at hundreds of banks each month about loan pricing and we monitor credit risk, cost and non-bank competition in every state, we have a unique vantage point to see what works and what doesn’t when it comes to banking profitable commercial customers.
Let’s say you want to introduce a new product – online commercial account opening for example. Being the savvy bank marketer that you are, you already advised your team that you will need a $30,000 budget to hit the required reach and penetration that your product team desires. Now, as the product is getting ready for testing, you have to decide how best to spend the budget. Do you send it all at once, spend it over a quarter or spend it over a longer period? The answer lies in understanding your marketing cadence.
It was 8:30 in the morning back in September of 1993 when the Brooklyn Chase branch was robbed by two masked gunmen. The security guard was hit across the head and locked in the men’s room, a teller was pistol-whipped, and the branch manager had a gun put in her mouth, the trigger was pulled, and luckily, the only thing that happened was a click. “Next one is real,” said the thug. “Now open the vault.” How this robbery was resolved sticks in our minds and is was one of the lessons that drove home our most valuable, and seemingly cheesy, negotiating technique.
Commander Bryce Benson was asleep at 1:30 am when the Philippine freighter, the ACX Crystal, rammed the USS Fitzgerald on June 17th off the coast of Japan (Figure 1 and 2). Within seconds the Commander’s stateroom flooded with cold seawater along with Berthing Room 2 that held 35 sailors. Four sailors grabbed sledgehammers, and one sailor grabbed the only thing he could, a kettlebell, as they started bashing in the door to the cabin enough to crawl through.
Loan spreads for C&I and CRE loans decreased slightly in February of this year from a month earlier, and they contracted further in March. We expect that spreads will continue to contract throughout the remainder of the year. The primary driver of declining loan spreads is the tax changes that passed into law at the end of last year. The vast majority of lending institutions have benefited from an approximately 30% reduction in their tax rate (or a reduction in the tax rate of the pass-through entity). The interesting question is this: