Since the conclusion of the 2008 financial crisis, the financial services industry has left its “crisis-response mode,” but we’re not in the clear yet. Many institutions emerged with their balance sheets in different stages of health. Though the economy continues to grow, we need more than a one-size-fits-all solution to get back on track. More than 10 Read More
More than 25 years ago, Bill Gates declared: “Banks are dinosaurs." I would argue that the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 is quickly reducing them to fossil fuel status. In his first 100 days in office, Donald Trump acted on his campaign promise to dismantle Dodd-Frank by signing an executive order that Read More
The Financial Accounting Standards Board (FASB) is expected to release the final standard of the current expected credit loss (CECL) model in the first half of 2016. This model changes the guidance for the way banks account for their allowance for loan and lease losses (ALLL) and will include, among other provisions, forward-looking requirements, a longer loss Read More
While bankers have generally become more sophisticated in their understanding and execution of profitability analysis, all too often, they are limiting their potential for success by failing to utilize tools such as funds transfer pricing (FTP) to their full capabilities. Many bankers are already familiar with FTP, often leveraging it to measure the net interest margin at Read More
In today’s sluggish economy, banks are looking under every rock for cost savings in order to show better earnings growth. One source of expense control, however, has been hiding in plain sight: the cost of courier services. With Branch Image Capture (BIC) and Remote Deposit Capture (RDC) technology, physical copies of checks are no longer necessary to Read More
Internal inefficiencies, such as siloed systems, redundancies and downtime, have a negative impact on banks of any size. With fewer resources to develop and implement processes to offset these inefficiencies, smaller financial institutions face a particularly steep uphill climb. For the more than 5,800 community banks in the U.S. that have fewer than 300 employees, successfully streamlining Read More
In December 2012, the Financial Accounting Standard Board (FASB) proposed a new current expected credit loss (CECL) model. With it came a number of changes and controversy, as institutions recognized the potential of an increase in allowance levels as a result of the changes to how losses are estimated. While many institutions, associations and firms submitted comment Read More
How can banks remedy their low-growth performance compared to other sectors of the economy? By taking a cue from financial services companies that have outperformed their peers. Defined in terms of growth in total shareholder returns (TSR), the clear outperformers are Capital One, Wells Fargo, and U.S. Bancorp. While the 13 other listed U.S. retail and commercial Read More
Having worked both as a banker and as a bank consultant for over 20 years, I can testify that this current period seems among the most negative work environments I have ever witnessed. Many bankers now act more like hedgehogs than leaders, operating out of a defensive crouch rather than putting themselves or their ideas forward. When Read More
Most financial institutions take an iterative approach to their budgeting process – running through multiple passes and scenarios before finalizing. We have seen the most progressive institutions take their budgeting practices to the next level by running stress scenarios as part of this iterative process. Given the risks facing financial institutions due to anticipated rate increases, which Read More
Print management is an important business function for banks, but it’s often overlooked. Despite the emphasis on security these days, companies too often ignore the security and confidentiality of internally printed materials, and they don’t see the hidden costs of indiscriminate printing behaviors. To secure print workflows, educate employees and reduce the cost of printing operations, bank Read More
Bankers throughout the country are increasingly focused on both attracting properly-priced funds and creating more practical, customer-centric ways to retain quality deposits. It’s no secret that retaining appropriately-priced deposits is a more cost-effective proposition than chasing new funding. Financial institutions have invested greatly in core infrastructure and are hungry for better strategies to most efficiently leverage the Read More
The invention of relational cell-based spreadsheet technology in the late 1970s was truly a game changer. Today the technology is so accepted and so much a part of our life that it’s almost like using a faucet. However, we need to keep in mind that Dan Bricklin’s VisiCalc electronic spreadsheet hit the market only in 1979, when Read More
Each bank is unique in that it possesses a distinct strategy, asset mix, product selection, customer base and risk profile that differentiates it from others. As such, the profitability and survival of each one of these institutions are largely determined by how well their boards and senior managers can balance current and potential earnings while maintaining adequate Read More
In recent years, many banks have made significant investments in the commercial business to drive growth and to deepen customer relationships. These investments have come in the form of hiring of relationship managers, adding treasury management products and staff and installing new technology. At the same time, interest spreads on commercial loans have declined and capital and Read More
For most banks, their retail franchise is the most valuable part of the company. Ask any M&A professional. Yet, because of the way many banks do business unit accounting, it is often the least profitable, especially over the last few years when the accounting value of deposits has declined precipitously. This presents a difficult issue for managers. Read More
While bankers historically have been focused on driving growth, the reality is that not all growth creates sustainable value or profits for banks. In fact, some industry estimates suggest that up to 40% of a bank’s customers may be unprofitable to their institutions. This underscores the level of complexity involved in effectively evaluating and managing profitability as Read More
Twice in the past twenty years we experienced a cycle of decrease and increase in the Fed funds rate. And in both cases, institutions started increasing their rates slowly and gradually a few months before the Fed actually started increasing the funds rate. The most recent event occurred in anticipation of the Fed funds rate that took Read More
Bankers continue to see pressure on net income and many are attempting to improve results by reducing expenses and maximizing fee income. In doing so, they are being reminded of just how hard it is to squeeze more net income out of current period revenue. The traditional assumption is that improving profitability means expense reductions. A better Read More
In their continuing quest to reduce expenses in a sluggish economic environment, bankers often ignore routine monthly expenses, such as for utility services. Is anyone at your bank managing that? Or is it just handled day-to-day, month in and month out? In our experience, the accounts payable department ensures that the utility company is billing the bank Read More
