October 2019

The Only 3 Things You Need To Focus on For Bank Strategic Planning

GAINING STRATEGIC VISION
GAINING STRATEGIC VISION

Strategic planning means a lot of things to a lot of different people. One problem that exists in banking is that the act of strategic planning is undefined and so management teams feel that if they can just get to an offsite, sit around a table, work on some budget plans and have an investment banker speak, then they have done their strategic planning. While all of that may help, true strategic planning comes down to essentially meeting two tests.

Adding Transparency To The Commercial Loan Closing Process

BETTER LOAN CLOSINGS
BETTER LOAN CLOSINGS

There is a correlation between the speed of commercial loan closing and bank profitability, and there are many reasons why banks that close loans faster can generate more profits.  While banks should be focusing on closing loans faster, there are other techniques that banks can deploy to enhance customer experience while keeping loan closing speeds unchanged.  Banks can leverage operational transparency to improve both perceived and objective service performance.

How Optionality Impacts Your Net Interest Margin

IMPROVING NIM
IMPROVING NIM

For the majority of bankers, maintaining or increasing net interest margin (NIM) is the single most significant focus today. The shape of the yield curve and lower rates have caused NIM compression across the board and have hurt bank equity performance. While we are not big fans of managing bank performance using NIM as it doesn’t take into account risk and cost, it is one of the most common performance metrics used in banking.

How Great Bank Brand Stories Are Built

BANK MARKETING
BANK MARKETING

Few bankers doubt the power of great storytelling. Instead of advertising, many banks have evolved into showcasing a customer, employee, or creative narrative that walks the reader to some point of conflict and then tells of a resolution. A story gets the reader or listener emotionally connected to the bank in ways that traditional, single message advertising can’t. Over the past three years, banks have learned that it is not just about telling a story but how to construct marketing around the story that makes a difference.

Here Is The Latest Thinking For Libor Fallback Language

Libor To SOFR transition

Today LIBOR is linked to over $250 Trillion (that is with a “T”) in financial instruments and has been used as a reference rate for more than 30 years.  However, regulators, for various reasons, are driving a shift to an alternative reference rate.  In 2017, ARRC (Alternative Reference Rate Committee) identified the alternative reference rate in the US as SOFR (Secured Overnight Financing Rate).  Most community banks use LIBOR sparingly in their loan and deposit contracts.  However, if a community bank has even one LIBOR contract, the issue of fallback language becomes essential.

Why Your Bank’s Strategic Time Horizon May Hurt You

STRATEGIC PLANNING AND INNOVATION
Strategic Planning and Innovation

If you look at the sensitivity in a bank’s budget, $1 of investment in a new line of business usually doesn’t break even for two to three years. $1 invested in finding a new customer usually returns about 9%, while $1 invested in a new product is usually above 20%. This all compares to about a 40%+ return invested in improving processes (loan, branch, cash management, etc.) and about an 80% plus return spent on reducing customer churn, increasing lifetime value and/or helping cross-sell.