Growth is Easy

It is hardly new news that many banks are struggling to grow, constrained as they are by a still-slow economy, an overly aggressive regulatory environment and an often cautious customer base. However, for many banks, growth is there for the taking if they are willing or able to implement the steps necessary to assess and benefit from the many growth opportunities available.

Here are six strategies to seize those growth opportunities:

Reorganize to increase sales time. In a recent client meeting, an institution’s senior bankers estimated that their relationship managers (RMs) spent 20% or less of their time actively selling. In fact, they felt that much of the non-sales duties of the RM could be done by others, freeing up sales time. Simple math says that if you increase time-for-sales from 20% to 40%, you have the opportunity to double sales results. However, if the wrong people are in the market, the math does not work.

As part of freeing up sales time, banks need to move to a team-oriented approach, one in which those with strong sales skills spend more time out in the market and those with credit and administration preferences take on more of the tasks required to support the externally focused RMs. More banks are now confronting the organizational and cultural challenges involved in doing this.

Greater consistency in cross-sales requirements. At another bank we’re familiar with, some of the line units set and meet cross-sell goals while others do not. Why this disparity? Senior management has never insisted on more rigorous goals across the bank. Nor has it established a consistent sales management process. Contrast that with banks that use salesforce.com or other CRM tools to communicate and track cross-bank activities. Cross-sell goals and focus eventually leads to a cross-sell culture. Banks cannot afford to operate with a laissez-faire approach to sales management.

Take advantage of Big Data. The benefits of applying the capabilities of Big Data’s proprietary and public databases include uncovering specific wallet share opportunities, priority setting for cross-sell opportunities and greater effectiveness in prospecting and identifying “consumer” accounts that are in reality small businesses. Today, capabilities that once were available only to the biggest banks are readily available to regional and community bank players. So, why not take advantage of this information advantage to better direct sales and marketing activities and banker activities?

Develop more specializations. The banks generating revenue growth operate with greater specialization than others. This specialization goes beyond industry to include types of products emphasized, life cycle of the target company, even the role and focus of the RM. However, in most cases, one or more industry specializations will pay off in greater revenue due to the knowledge, expertise and contacts of specialized bankers and how this differentiates their bank from others. In effect, many banks already have specializations, but they have not effectively organized or marketed them. Differentiated banks sell more with higher profits. Period.

Link up with alternative players. Banks need to spend more time understanding the impact of the many alternative players such as OnDeck Capital, Lending Club and merchant advance companies operating in and around their space and determine, not whether but how, to partner with them. These players are not going away; they are getting bigger and more important. They focus both on lending and non-lending activities and they want to develop partnerships with banks. For example, alternative lending activities have increased significantly in light of a more restrictive bank appetite for loans. Merchant advance companies and person to person (P2P) lenders have programs to work with the banks in various ways, potentially generating additional risk assets and/or fees. Banks need to reach out to these and other nontraditional players in order to serve more customers and generate income from doing so.

Financing lenders. After a pullback during the downturn, more banks are now once again lending to other lenders. These alternative providers often lend to subprime and/or secured borrowers that banks will not lend to directly because of regulatory concerns. If a bank lent to one of these secured lender’s end customers, the loan would likely be classified immediately. However, lending to the secured lender for on-lending to this same end customer is acceptable. The bank achieves additional loan outstandings by relying on the risk management capabilities of its borrower. Such loans enable the bank to broaden its risk parameters without taking on the additional capital requirements in doing so by, in effect, lending through a third party.

Now, of course, it may be an overstatement to describe these growth opportunities as easy – there are no home runs and little, if any, “secret sauce.” However, with management focus and prioritization, one or more of these growth options can begin to contribute meaningfully to top and bottom line growth. 

Mr. Wendel is president of New York City-based Financial Institutions Consulting, Inc. He can be reached at [email protected].