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“it’s the deposits, stupid!” how to prevent your bank from starring in a sequel of 2018
In 2008 we saw many banks that heretofore appeared to be investor darlings, implode in a tsunami of defaults and skyrocketing LLPs that wiped out profitability. Why?
Deposit weakness. Our analytics proved that banks that scored low on our Deposit Strength Index (DSI) were more likely to fail in the previous cycle.
How can deposits, and a bank’s lack of strength in them, lead to troubles on the credit side of the balance sheet?
Why are deposits (more so than credit risk) important in determining who wins through a cycle?
SIX PROJECT IDEAS TO CLOSE 2018 WITH POWERFUL QUICK WINS
As we discuss with clients their priorities for 2019 engagements, many ask for quick win ideas to deploy remaining 2018 budgets against.
These are the most popular ideas for “Q4 specials” we have been sharing:
Monitoring Face-to-Face Customer Interactions
Developing a Cross-Sell Strategy
Designing a Retention Tactical Toolkit
Developing Customer Analytics Capabilities
Performing an Express Retail Diagnostic
Developing an SME Strategy
WHY IS PROFITABILITY MEASUREMENT AT A GRANULAR LEVEL SO IMPORTANT IN BANKING?
Boards of Directors, senior executives, and shareholders correctly obsess about profitability. But ROA, ROE, and related profitability metrics tend to disappear from performance reports as we move down the organization. Rarely does one see true profitability, let alone ROA or ROE, reported at the branch, RM, or even Business Unit levels.
Why not?
Why is this a problem?
Why is it worth having?
DOES CUSTOMER EXPERIENCE REALLY DRIVE SHAREHOLDER VALUE?
Bank customers often complain about their service experience. Bankers try to improve their customers’ experience, but success is elusive. For the few banks that achieve service excellence, there is a treasure at the end of the rainbow: higher shareholder value.
Can we quantitatively prove this?
SIX ANALYTICS PLATFORMS EVERY RETAIL BANK MUST HAVE
Many often talk about the need for analytics in banking. Recent trends are on deposit pricing and there is an increased focus on operational risk.
But which are the core/foundation “must have” building blocks on which management can build strategies and tactics to increase shareholder value: ROE and revenue growth?
There are 6 models or algorithms a retail bank should implement in order to achieve an analytics-based management capability.
Seven Questions To Break The Cross-Sell Barrier
There is a painful fact in banking: across its base, a bank has less than 30% of its customers’ share of wallet. The rest is with competitors or, even worse, is an unmet need.
Banks approach this problem from their vantage point and bombard customers with offers to gain the share of the wallet they do not have. Yet these efforts typically fail to understand human choices driven by psychology, logic, or just habit.
Typical cross-sell efforts are uninformed by the answers to these 7 questions.
Are you service aware? C-SAT: The "Last 100 defectors" test
You may pride yourself of being aware of every financial metric and deeply understanding how a movement by a few basis points affects shareholder value.
But can you answer a more meaningful question:
"Do you know why each of the last 100 customers that defected from your bank and moved their business to another competitor did so?"
Is Managing To Metrics Dead After The Wells Fargo Fine?
Wells Fargo received a $200 million fine because its volume-based front line incentive ended up providing the wrong incentive to their front line.
What lesson can banks around the world learn from Wells Fargo's experience? Have front line incentives become too dangerous? Is the right solution more internal checks and balances? Something else?
We believe the concept of "Value-Based Incentives" is the answer.
Why worry about "worry management"?
Customers encounter multiple worries when interacting with financial institutions. These worries are a major but unrecognized root cause of customer dissatisfaction and market share loss.
Furthermore, because worrying is often a feeling that exists in the background, customers do not articulate it in their complaints or voice it when asked general open-ended questions about their experience.
Banks that proactively address and manage their customers’ “worries” have more satisfied and more loyal customers.