I live in Iowa. Just like you, we’re going through COVID, we’ve had political unrest, we’ve experienced demonstrations. And in the midst of all these things happening, in Iowa, we had what is called a derecho, which is actually a hurricane on land. So pretty much nothing can surprise me now. But I have also learned there are ways to prepare for the unknown, and timeless fundamentals of the financial industry that we must accommodate and focus on regardless of the current environment.
In a nutshell …
In order to sustain success, there are 5 things that every bank CEO wants, whether there has been a pandemic or not, whether there has been a derecho or not. So as bank marketers, we must in our actions, and with our resources, relentlessly focus on those critical areas.
First on the list is consistent acquisition of low-cost deposits. Low-cost deposits are the gas in the engine that allows your financial institution to loan money, which ignites economic prosperity. If we don’t have low-cost deposits, we can’t get the engine started or keep it running.
Next, we need core relationship (aka share of wallet) growth. You need, by and large, all of Becki Drahota’s relationships for me to be truly profitable to your bank. Run the numbers yourself. A single-service checking account customer can easily cost you over a hundred dollars a year. We can no longer be satisfied knowing that Becki Drahota has accounts elsewhere, but because she has 2 accounts with us, that’s good enough. Good enough isn’t.
Third, asset quality is huge. Workouts are time-consuming and expensive, so we must make loans that fund growth and prosperity but don’t take an inordinate amount of time to keep on track. It’s a challenging dynamic that often results in new, lower loan-to-deposit ratios.
Fourth is non-interest income; overdraft fees are declining pretty systemically. Debit card interchange is declining, and cash-back rewards credit card usage is replacing debit card volume. We have to find ways to make money that are not margin-related, which means focusing on LOBs like Wealth Management and Treasury Management services, which are historically understudies to other products.
The fifth thing every CEO wants is brand equity. Whether you engage in M&A or grow organically, a strong brand reduces the cost of sales, improves employee retention, and more. But financial industry brand values lag other major industries, and the “Friendly Bank” message has long ago become table stakes.
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