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.
Banker To Banker
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.
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.
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.
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.
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.
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
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).
After meeting and demo-ing some 70+ companies at Finovate (including non-presenters), there is more of a gap that we alluded to yesterday. Yes, the technology presented was interesting and the show format perfectly efficient, but there are a couple more glaring holes outside of the lack of discourse around profitability and risk management plus the lack of innovation around handling the small to mid-sized commercial customer that we highlighted yesterday.
Yesterday, we had the opportunity to attend Finovate, the Super Bowl of financial technology held in San Jose, CA. We came away a little underwhelmed from the community bank perspective but were pleased that most of the technology was headed in the right direction. The venue and the show were up to its usual high standards and seeing 33 companies in one day was highly efficient. However, the discussions could have taken place three years ago.