Banker To Banker

Channel Delivery

JP Morgan Chase’s new branch in the Texas Medical Center in Houston is special because of what is not in it – teller stations. Instead of a teller line, the new branch features an express banking kiosk or “EBK.” Basically a giant 21.5 inch iPad that customers can swipe, point and click to dispense cash in increments of $1, make deposits, pay bills, withdrawal up to $2,000 and even issue a new, permanent debit card.

 

Data on Loan Bank Performance

When is the right time to refinance an existing commercial real estate loan on your books? Refinance too early and you most likely forgo a larger credit spread. Refinance too late and the borrower seeks additional competition. In previous analysis we showed that the average spread between refinancing with and without competition is about 40bp. Thus, we advocated putting a retention program in place that covers any loan above 1.2x debt service coverage that does not have some form of prepay protection.

Branch Delivery

PNC is underscoring the latest trend in banking of going to lower cost, more flexible branch foot prints. The Bank is experimenting with a 'pop-up' branch located in Chicago after they experimented with a similar structure in Atlanta.  The Chicago location opened today and plans to be there for three months before moving. The pop-up structure not only helps build the bank’s brand as a forward thinking bank, but allows an inexpensive way to open accounts, demo new products, talk about consumer lending and garner feedback from the area on if a future branch makes sense.

State Bank Ranking

An old bank goodbye used to go, “May your loans repay and your good balances continue to improve.” While times have changed, the sentiment holds true and now, with the advent of data dashboards, you can see all in full, interactive color. In fact, by looking at the state banking performance map (see graphic on ROE) you can see much less red. Geography has one of the greatest effects on bank performance as it drives credit quality, pricing and a number of other factors. Some states have certain advantages or disadvantages over others.

Customer Onboarding

As you look for ways to increase your brand without driving up your cost and you are building a business model around service, having a formal process around onboarding your customer is one of the best things you can do to start a culture of service. When a new client leaves your office or completes an online transaction for the first time, the honeymoon period begins.

Legal Risk of Real Estate Lending

You can ignore banking law, but it is a life force that is always around us, everywhere, all the time – just like Ryan Seacrest. Similar to that hard working celeb, banking law, particularly as it pertains to commercial lending, really came into its own during the downturn. It seemed like every loan had an issue.

Savings Account Innovation

Last week, Suntrust introduced their new savings platform called e-Savings that allows customers to open multiple subaccounts tied to their regular checking account. What is basically a modern redesign of the Christmas Club account, the platform allows bank customers to segment their funds for specific purposes thereby giving savers more control and accountability.

Bank Pricing

To solve the problem of decreasing margins on bank products, meditation will surely help, but while you are clearing your mind, ask yourself how effort you have invested in training, products and marketing? We see this all the time, including at our bank. We present one loan structure without equipping our officers in the field with the necessary brand or marketing tools and then are surprised when the customer wants to compete on price. What else can the customer do? If every bank offers basically the same structure, price naturally stands out and begs to be negotiated.

Loan Profitability

As loan pricing becomes more competitive, the opportunity to book high quality credits at thin margins presents itself more and more. A 2% margined loan represents about a 9% risk-adjusted return on equity (depending on your cost structure), which is below most bank’s cost of capital. As such, there is every reason to pass on the credit and let another bank book the loan. However, before you do, consider the following points:

 

EPS is increased

Bank customer satisfaction

Put negative press, technology problems and low deposit rates aside, because banks just hit an all-time high in the gold standard of surveys – JD Powers. Their 2014 Retail Bank Customer Satisfaction survey talked to 80,000 customers in 11 regions and rated banks above $2B in assets on channel, problem resolution, products, facilities, fees and account information (Rankings are based on numerical scores, and not necessarily on statistical significance).

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