While the Kentucky Derby, NBA and NHL playoffs kept bankers busy this weekend, there was also work to be done as we saw our first complete set of data from 1Q. Today, we provide you the most current perspective on our banking industry, as we have compiled the latest data and have attached a complete presentation at the bottom of this blog post.
Tag: Bank Performance
Most bankers do not have a pricing strategy. They price with the competition, become reactive and thus eliminate their bank’s strategic value. Every bank faces a different cost structure, different set of objectives, different risk profile and has different capabilities. Meeting each competitor’s price ensures that you will have the lowest margins in your area over time. You may succeed when times are good, but you won’t when the next shock happens and the cost of credit and capital become monetized.
It was almost with equal sadness that we bid the 2016 ICBA Live conference goodbye this morning and Dos Equis’ World’s Most Interesting Man.Yesterdayboth announced their completion. We also bring up the latter because we are going to miss anybody that can bowl overhand, wins a lifetime achievement award - twice, speaks Russian - in French and once won the World Series of Poker with only Uno cards.
The average bank approves approximately 85% of their loans that are submitted and turns down about 15%. Separately, this blog has highlighted the fact that an experienced community bank loan officer can predict bank approval about 80% of the time. This came up the other day, when a loan officer that sits on loan committee said that a specific loan is not likely to get approved in his opinion. While most of the staff was disheartened upon hearing this, we had to point out that statistically, this loan officer, no matter how experienced, is probably wrong.
Before there was banking, there was trust services. Discussed by Homer and then Aristotle, the concept has its roots in both Roman and Islamic law. However, it was English law in the 12th century that had to perfect the structure for noble landowners to pass their estate on to the next generation. As anyone that has seen Game of Thrones will attest, that can get messy. By the turn of the century, chances were that if you were not a savings bank, you were a “Bank & Trust.” These days, about 1 in 6 community banks have trust departments.
If you want to change the face of your bank, one of the fastest ways to do it is by changing the compensation structure.
Falling energy prices have been front and center in the headlines lately, which is a good thing for retail-oriented banks. Experienced retail bankers understand that consumers often react to lower energy prices by treating it as a windfall and increasing their savings rate. Statistically, the correlation over the last 5 years is that energy prices explain approximately 68% of the savings rate – a correlation that is exceedingly predictive. The question is, what is your bank doing to take advantage of this trend?
When it comes to loan authority structure, six banks will do it six different ways. Loan authority is granted from a bank’s Board of Directors and gives each credit line position a certain amount of lending authority to approve the loan. While a front-line loan officer may have $500k in authority, their boss, the Chief Credit Officer, may have $5 million. How your bank handles loan approvals can have a profound influence on your bank’s performance. Get the loan approval process wrong and find that your bank is not only taking on too much risk, but driving up costs.
When we asked bankers what made a difference in 2015, we wanted to highlight one of the best pieces of advice that was given to us and that some bankers put into practice this year. In the quest to build a better bank, there are two questions that the answers can help your bank hone in on what is important.
If there is one thing we can all improve on its customer service. While the industry as a whole continues to show top ranking for satisfaction among all customers, the dispersion within the industry is getting wider. According to Gallup polls, the banking industry ranks near the top of all businesses in the country for customer satisfaction along with pharmacies. J.D.