Financial Research: Grappling with Technology

Bank leaders want to know more about how to leverage technology to make their institutions more profitable, but don’t know where to start, reveals the 2014 Growth Strategy Survey. Bank Director and CDW surveyed 145 independent directors and executives in June and July to uncover technology’s role in growth strategy.

Growth-Survey-Group-1Bank leaders know that technology can make their banks more efficient, and know that customer demands are only growing. But less than one-third talk about technology at every board meeting, and one-quarter of banks lack the IT staff to grow the bank.

Growth-Survey-Group-4When asked about the top technology concerns for their banks, keeping up with the evolution of mobile banking is a concern for more than half. Data analytics is also top of mind, and the survey finds that big banks are better users of data. Forty percent of respondents overall use business intelligence tools and analytics within their organization, but more than three-quarters of banks over $5 billion in assets currently use data to support growth goals.

Growth-Survey-Group-2One-third are concerned that the bank’s core processor impedes the bank’s ability to innovate. Community banks in particular depend on vendors for their technological expertise, yet half say that their core processor is slow to respond to innovations.

Growth-Survey-Group-3It’s important to note that many of these concerns about innovation and the use of data tie into growing concerns about competition from outside the industry. Eighty-four percent of respondents say that today’s highly competitive environment is their greatest challenge when it comes to growing the bank, and 83 percent worry about nonbank competitors. Banks above $5 billion in assets reveal a heightened concern about PayPal and Amazon.

Full survey results are available online at BankDirector.com.

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The Growth of the…Branch?

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The American Bankers Association just released survey results that say that the number of Americans that prefer to bank within a branch actually grew within the last year. Americans opting for internet banking fell by 8 percentage points, while the number who prefer to meet their banking needs through ATM or mobile each grew slightly.  The ABA theorizes that recent technological advancements made within bank branches have made the channel more efficient and therefore, more attractive to customers.

Reflecting the view across the pond, Accenture released a study last month, focusing on the UK financial services industry, with similar findings–online banking remains steady, while the use of branch and mobile channels grow.

There are certainly branch success stories for community banks in the U.S., and most of these involve a transition to self-service, whether through the use of image-enabled ATMs or video tellers. Kennebec Savings Bank uses image-enabled ATMs to handle one-third of the bank’s deposits, and the machines allow the bank to expand in its market through self-service branches more cheaply  than through a traditional branch. And Conestoga Bank opens two-to-three times more accounts each quarter through video tellers. (For more on how these banks are using technology in the branch, please read my contribution to Bank Director magazine’s innovation section, “Will Video Kill the Teller Line?“.)

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Big Disparities in Bank CEO Pay

As discussed in my prior blog post, the 2014 Compensation Survey finds that bank boards are earning more and lending is a big focus for executive hires. But the survey also delves more into CEO pay this year, and while the disparities in pay for the largest and smallest banks should be expected, it’s still jarring to see.

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For the industry overall, the median compensation amounts for bank CEOs total:

Salary: $241,600
Cash incentive: $44,600
Potential cash incentive: $57,600
Equity grants: $50,000
Benefits & perks: $21,231

Ninety-nine percent report that the CEO receives a salary, while 41 percent report that the CEO receives equity grants. Half report a cash incentive, and more than two-thirds say that the CEO receives some benefits & perks.

You’ll find more details on bank executive pay within the 2014 Compensation Survey.

Financial Research: Is a Focus on Growth Yielding Higher Board Pay?

GrapesUnsplashBank Director just released the results of its 2014 Compensation Survey, sponsored by Meyer-Chatfield Compensation Advisors, and the results may reveal some good news for the banking industry, as evidenced by two key trends:

Lending is fueling more executive hires than compliance or risk, with boards focusing more time on loans. Loan officers are in strong demand at banks of all sizes, with more banks citing growth than regulations as the driving force behind change at the executive level. 

Bank boards are earning more. After getting their regulatory ducks in a row, a renewed focus on profitability may have translated into increased pay and benefits for bank directors. With median fees set at $750 per board meeting and median annual retainers at $20,000, bank directors are seeing a modest income for their service. However, the view isn’t as rosy for small banks: Almost half of boards at banks with less than $500 million in assets haven’t increased pay since at least 2010, and director pay is significantly lower at these institutions.

You’ll find the complete results to the survey, including median pay data for CEOs and boards, HERE.

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Is it time to love Bank of America?

Bank of America held their annual meeting yesterday, and according to many sources — including the Charlotte Business Journal’s Adam O’Daniel, who has a great account of this story — there was a Brian Moynihan super-fan in the house:

You are the finest CEO in America and the hope for America, Mr. Moynihan.”

“Up the stock to a million and I’ll marry you in the morning!

According to O’Daniel, Peggy McMahon has 22,000 shares of BofA stock, which is currently trading at just under $15 per share. Bank of America will need to make a lot of gains for McMahon to see her million. But Bank of America has put a lot of work into turning the company around, as Bank Director Editor Jack Milligan details here, and is poised for a “return to mediocrity”:

Meanwhile, JPMorgan Chase & Co. CEO Jamie Dimon told the audience at Euromoney Saudi Arabia conference in Riyadh that he sees unregulated, non-bank companies like Google and Facebook as potential competition, echoing the thoughts of 58 percent of bankers at Bank Director’s Growth Conference that said they were ‘very concerned’ about non-bank competition entering financial services.

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Great recap of The Growth Conference from Bank Director President Al Dominick. He’s encouraged by the stories of bankers with successful growth strategies that overcome the obstacles created by weak loan demand, compressed NIM and regulatory pressures.

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It is obvious that the most successful banks today have a clear understanding of, and laser-like focus on, their markets, strengths and opportunities.  One big takeaway from the first full day of Bank Director’s Growth Conference (#BDGrow via @bankdirector): banking is absolutely an economies of scale business.

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A 2 Minute Recap

Creating Revenue Growth

At events like these, our Publisher, Kelsey Weaver, has a habit of saying “well, that’s the elephant in the room” when I least expect it.  Today, I took her quip during a session about the strategic side of growth as her nod to the significant challenges facing most financial institutions — e.g. tepid loan growth, margin compression, higher capital requirements and expense pressure & higher regulatory costs.  While she’s right, I’m feeling encouraged by anecdotes shared by growth-focused bankers considering (or implementing) strategies that create revenue growth from both net interest income and fee-based revenue business lines. Rather than lament the obstacles preventing a business from…

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The Keys to Growth

KeyString_MFReal estate lending drove much of the growth in the banking industry in 2013, reveals the 2014 Growth Leaders Ranking just published in the latest issue of Bank Director magazine. But, writes Bank Director Editor Jack Milligan:

Low interest rates and a healthier housing market in many areas of the country helped drive a surge in mortgage refinancing and new purchase loans through the first three quarters of last year… However, in what could be an ill wind for 2014, mortgage refinancing activity cooled off significantly in the fourth quarter of 2013 and first quarter of this year. “That will be a challenge going forward,” says Kevin Tweddle, president of Atlanta-based Bank Intelligence Solutions, a subsidiary of Fiserv Inc., which prepared the ranking with input from Bank Director magazine.

With reduced mortgage refinancing activity and  home sales on the decline, what will fuel growth in 2014? Innovation will surely play a part. As Bank Director President Al Dominick observes here, a refusal to adapt and change could be the greatest roadblock for many banks when it comes to growth. With this in mind, I found this particular statistic from Fiserv striking:

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