Tag: Bank Profitability

What COVID-19 Might Mean For Your Branch Strategy

Branch Investment Rebalance

Chances are you were already reducing the number of your branches. Between the interest rate environment over the past several years, the increase in digital spend, and the quest for greater operating leverage, banks can no longer afford large branch structures and still return their cost of capital. Recent studies now suggest a lower probability of a COVID-19 vaccine and a much lower probability of achieving herd immunity, at least over the next three to five years. As such, most every bank will be forced to rethink its branch strategy.

 

How Commercial Prepayment Speeds Are Making Your Margins Worse [Get Our Model]

LENDING PORTFOLIO MANAGEMENT
LENDING PORTFOLIO MANAGEMENT

There has been substantial research on how prepayment speeds of residential mortgages affect the profitability of individual loans and portfolios.  Because of the homogenous nature of residential mortgages, many firms have developed highly predictive models to calculate prepayment speeds based on past behavior, portfolio makeup, and macroeconomic variables.  However, very little research is available on prepayment speeds of commercial mortgages – this is understandable because of the uniqueness of each commercial loan.  Even sophisticated loan risk-adjusted return on capital (RAROC) models

Loan Floors and the Zero Interest Rate Environment

Extreme ALCO - Guy pondering interest rates
EXTREME ALCO

We are working with numerous community bankers to develop strategies for instituting floors on commercial loans. The idea of protecting floating or adjustable rate assets is not new to community bankers, but the current interest in this concept is spurred by specific and unusual communications and market developments that are worth analyzing.

Bank Worker Productivity and The Technology Imperative

Bank technology investment
BANK TECHNOLOGY INVESTMENT

Back in the 1980s, there were more banks, smaller banks, and little technology. We were still driving checks around, there was no online banking, and networked ATMs was the latest in bank technology. At the time, the rule of thumb for bankers was that each bank employee produced about $20,000 of operating profit per year. Since each bank had about 100 employees, operating profit was about $2mm per community bank. In this article, we look at how this equation has changed and what it means for the future.

 

8 Ways To Attract The Wrong Clients To Your Bank

MANAGING BANK CULTURE AND PROFITABILITY
MANAGING BANK CULTURE AND PROFITABILITY

Given that strategic planning season is upon us, one key affirmation is to verify if you are targeting not the customers that you have now but the customers that you want. Chances are, at least at some level, you are attracting the wrong customers that are not profitable, not engaged, not being a raving fan, causing some level of pain, or all four.

 

5 Closing Tactics of Experienced Commercial Bankers

Bank Sales Techniques

Sometimes in banking, the closing of a particular loan or deposit transaction drags on for no other reason than the customer is reluctant to agree to the terms either for spoken or unspoken reasons. At CenterState, we have learned some valuable lessons from other banks that have helped us close more transactions and can help every relationship manager gain more of an advantage to cut down closing times and increase their closing percentage. In this article, we break down these five lessons.

 

 

How To Stop Treating Bank Departments Like Silos

Breaking Down Bank Silos

Banks are famous for operating in “silos.” Loans in one department, deposits in another and mortgages somewhere else. In some banks, every department is left to fend for themselves and turf wars erupt as confusion reigns about who really “owns” the relationship. In most cases, banks often place the burden of selling different products and services on the relationship manager as they pick and choose from a laundry list of products and services in which to position to the client.

Understanding Survivorship Bias In Banking

A more profitable loan portfolio

It is 1942,  you are in Air Force command, and you want to keep our flyers safe. Our planes are being shot down at an alarming rate, and your solution is to install armor. But the armor makes the plane heavier, and heavier planes are slower, less maneuverable and use more fuel.  Realizing you cannot armor plate the entire plane, the question arises what is the optimal amount of armor and where should it be placed to give our soldiers the best chance to complete their mission alive?

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