CEOs set their goals for 2019

With the start of a new year, it’s important to remember that the growth and profits you’ll experience are directly related to the priorities you set for your institution.

Here is your executive summary of their most frequently mentioned priorities and comments:

Deposit Growth. As rates continue to rise, banks and credit unions are scrambling to lock up term deposits as quickly and as profitably as possible.  While an above market rate continues to be the fastest way to pull in CDs, increased marketing efforts are also underway to cross sell deposits to existing accountholders, plus improve the sale of core savings accounts.  For example, some institutions are sprucing up their relationship marketing programs to give existing accountholders new reasons to consolidate accounts and deposits.  Other institutions, meanwhile, are adding prizes and sweepstakes promotions to their savings account products with the goal of attracting new accounts, and encouraging steady monthly deposits to them.

Loan Growth. Rising deposits rates are also pushing up loan rates, of course, and that is worrisome to a many of the CEOs we’ve talked with.  Higher mortgage loan rates, for example, eventually weed out even good  borrowers, plus add more risk to the entire lending equation.  The irony of this is that money is still available today for those meeting even entry-level lending requirements.  For example, in Southwest Florida, first-time borrowers can get a $250,000 condo loan for just 3 percent down.  With a mortgage loan rate hovering around 5%, and a sales commission of 7%, these new homeowners are going to be locked into their loans for a long time before they can sell just to break even.  And if property values start to tank, like they did in 2008 – well you know the story.  In a typical condo or homeowner association, everyone’sproperty value falls whenever there is a panicked sale, and distraught homeowners start to walk away from their loans.  These painful  lessons from the last major downturn are still close enough to remember.

Mobile Services. Without question, the mobile phone that most people carry with them is fast becoming their bank.  In fact, some successful 30-year-olds have never even been inside a bank.  Just think about that for a moment before you set your 2019 plans for mobile services!   Most institutions today are looking at both mobile technology and mobile marketing, and how the two are going to fit together.   For example, with mobile technology, bankers continue to add new services to their apps, plus make them safer and faster to use.  Mobile marketing plans, by comparison, encompasses attracting new mobile users, plus marketing to them with mobile ads.  With geo-targeting, for instance, it’s possible to deliver loan promotions directly to prospective auto buyers’ phones, right when they are nearing a car dealer.    And that’s just the beginning.

Digital Transformation. This buzz term includes mobile services, but also encompasses much more.  Digital transformation is where we all seem to be headed, and is effecting everything in your institution from facilities to operations to marketing.  It encompasses how your customers perceive your officers and institution, plus how you market and deliver your products and services to them. The good news is that our digital world allows your institution to market financial services to anyone and at any time. The bad news is that you are competing against every institution now, instead of just those within a certain geographic radius. This means that experienced digital managers will soon become some of the most sought after  employees in any bank or credit union.  Which brings up the question:  Does your institution have a full-time Digital Manager?

 Staffing for Profits.  If your institution isn’t currently staffed to maximize growth and profits, you’ve got some work to do before 2019.  And while no relishes the job of firing people, replacing them with better performers is a job that needs to be done if you want to keep moving ahead. Sometimes this is easiest to see in an industry outside of banking.  For example, a major retailer in Minneapolis recently closed an entire division at their headquarters, much to the surprise of almost everyone who worked there. After laying off the people who worked in this division, managers told them they could reapply for other jobs within within the company.  So here’s my thought:  If your institution closed a division and laid off everyone who worked there, would you immediately interview and hire all of these same employees again?   Or, would you just keep the star performers, and tell everyone else you’ll call them if something else opens-up?   Staffing for profits mean you always have the best employees in every position.

Branch Management. With banking’s digital transformation already well underway, why even bother with branches?  This is a legitimate question, and one that got a variety of responses when we talked with CEO’s.  Again, you can sometimes see things clearer when you look outside the banking industry. For example, my wife likes to shop online with companies that have local stores.  This way, if there is any problem with the product she has ordered, she can return it to the store.  And yes, I know Amazon often offers free return shipping, but the local store ads credibility and convenience to the deal that is hard to replace.   Here’s another example.  A large retail department store chain that we have shopped in for years recently went out of business. Because we were customers, we received a letter from the company saying that even though their retail stores were closing, we could still purchase items from them online.  On the surface, this sounds fine.  But without the physical store to return things to, why bother?  And more importantly, we knew the store because of its physical presence.  For new shoppers, this will no longer be possible. The take away here is that bank branches are still relevant and important.  How you use and market them will continue to impact your future growth and profits.

Planning for Growth. When you’ve been around banking as many years as I have, it’s easy to see which institutions have grown, which have folded, and which have basically missed the boat.  It’s also easy to see why these changes have happened.  For example, the fastest growing institution in my home-town of 9,000 people started as a Savings & Loan.  Then it changed to a bank, went public, and expanded into nearby communities and states.  To fuel this growth, the bank staffed for profits, offered cutting edge financial products, and took some carefully measured risks.  Today the bank has $4 billion in assets and is poised to keep growing.  By comparison, the slowest growing bank in my community was actually the largest one 30 years ago.  Today, this bank’s ROA is good, but it’s growth is stagnant because of its ultra-conservative management that only  offers below market deposit rates. Which direction is your institution headed and where would you like it to be in the next 30 years?  The priorities you set for this year will have a lot to do with how fast you get there.

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