Crunch Time | By Roxanne Emmerich
There is a growing level of alarm among bank executives about a new topic – how to make sure your capital grows and avoids risk in light of Basel III.
They’re right to worry. It could be a show-stopper for those who don’t get prepared right now.
Doing what you’ve done in the past and hoping for a better result is probably not going to work out well in this environment. Instead, let’s figure out what you need to do differently to make sure you don’t get caught with your pants down when the perfect storm of bad economy, increasing rates and Basel III all slam together.
Here are five things to make serious progress on now, so you don’t have to lose sleep after acting too late:
Stand out from the Competition
You have a mountain of evidence that you need to match rates. Lenders stampede to your door every week telling you that you’ll lose the deal unless you match the rate. But they are dead wrong if they think that rate matching will lead to anything but oblivion for your bank.
Your unique selling propositions (USPs) just can’t be wimpy. Your bank has been around for 113 years. That’s great. But nobody is really going to pay up for that. Would you?
And it’s nice that your lenders all return calls the same day – but that’s not worth 150 basis points more on the deal now, is it?
My other favorite is, “We have good service.” That’s the price of admission, not something that’s worth premium pricing. Talkable experiences justify premium pricing, and “good service” doesn’t qualify.
Not one of these tired old USPs stands to increase what you should get paid. But these are the ones that most lenders flaunt – and then are incensed that they didn’t get paid premium pricing for them.
I know you don’t believe it can be done. Tell that to the banks who have well over five in net interest margin and picked up 40 to 100 basis points in the year. They used to believe that, too.
Change Your Beliefs
There is nothing more dangerous than a “need to be right” executive who digs his or her heels into a belief system that says it can’t be done.
If you believe you can’t be paid premium pricing, you are right. If you believe you have to get that pricing, and therefore need to figure out how to be worth more, you will.
Get Onboard the
Premium Pricing Sales System
Notice that I didn’t say, “Get sales training.” Most sales training not only doesn’t get premium pricing, but actually disengages a workforce.
There are thousands of banks that have spent millions of dollars on sales training that didn’t work. That’s because sales training by itself NEVER works.
Does that mean you shouldn’t do sales training? No. Just don’t do sales training that isn’t part of an integrated process of strategic planning, marketing integration, accountability, culture transformation, and leadership and management development.
Resist the Temptation to Acquire
Acquisition sounds sexy. Weak banks will be throwing the keys at stronger banks, and you might think it sounds easier than organic growth. But think again.
When you acquire, you get the bad loans, the people who made them, AND the mindsets and skillsets of the executives who caused that bank to get into the shape it’s in.
You also get a culture of “us-versus-them” game-playing that typically takes two years to clean up, during which your own bank’s culture goes through the shredder. Now that’s costly.
Always consider organic growth first and get good at it. Then and only then should you consider picking up one of those banks at a bargain price.
In order to acquire, you have to have your own house in order first – from systems of culture to hiring to marketing to sales processes, you want systems that work to create predictable and profitable growth before you risk blowing up everything you’ve built.
Build Your “Predictable Success Franchise Model
Too many banks have no systems for hiring top performing lenders, no critical drivers for every position in their banks, and no management development program to make sure people are hitting those critical drivers.
Winning banks have created wall-to-wall, franchisable systems. They don’t wonder if the things that lead to success are happening. They know they are.
We can’t know all of the consequences of Basel III. But putting these five key concepts in place will go a long way toward protecting your bank and your profits from the worst of it.■
Roxanne Emmerich is CEO of the Emmerich Group Inc. Contact her at Roxanne_Emmerich@EmmerichGroup.com.