Highlights of the RMA CEO Panel
A panel discussion of bank CEOs touched on a number of interesting topics at the May 24 Annual Meeting of the RMA Maine Chapter. Appearing on the panel were David Ott of TD Banknorth, Steve Woods of KeyBank, and Chris Emmons of Gorham Savings Bank. Mike Bonsey of Bar Harbor Bank & Trust moderated. Below is a synopsis of the issues raised and the CEOs’ comments.
• We have to look toward expanding the pie and to do that we have to attract new business to Maine. Other ways to grow the pie: find new products and efficiencies and look at other lines of business such as investments, insurance products and leasing companies.
• We shouldn’t try to compete in products where we’re not as good as other banks.
• Banks should focus on their clients. They are precious. Cross-sell them. Service them. Don’t take them for granted.
• Look at niche markets where you might find opportunities to establish something sustainable to the bank. The cost of establishing new lines of business is high, however. It takes time for them to be profitable.
• Risk management is a big piece of the puzzle and a huge expense, and banks large and small are faced with equal regulator expectations. You don’t get forgiven on regulatory issues because you’re small.
Impact of Credit Unions
Lots of things we sell have become commodities, and the public often demands the highest deposit rates and the lowest loan rates. It’s hard when your bank can’t sell a product or service at the lowest price. Everything is price-driven, and if we’re not competitive, the business will go elsewhere. Credit unions have priced their products to attract an enormous number of customers statewide. Companies like Wal-Mart pose another source of competition, especially in light of the resources they can put toward technology. Looking on the positive side, it makes all banks have to enhance their products and services.
• After we emerged from the problems of the late ’80s, we all wrote underwriting guidelines. But now underwriting standards have gotten looser because of competitive pressure. Pricing is tighter. There is a new crop of employees who haven’t seen hard times and don’t realize what can happen. Those who date back to the ’80s may have a better understanding of the repercussions.
• It’s better to focus on policies and not stray too far from them. A medium to small bank might take a risk on pricing, but a wrong guess on credit can be a big blow.
Bank Involvement in Politics
• Success in the financial services industry will depend on wealth being created. Unless changes are made to the tax structure and political attitudes toward business, there will be no economic growth.
• We have to educate voters and business people about what is going on, because only they have the power to elect people who will legislate effectively for economic growth. If we don’t start taking taxes and economic growth more seriously, we’re in for bad news.
• There was a time when bank executives were the architects of economic growth. Now that is all politically focused. Banks can’t drive business into the state when they are stymied by a political system that discourages doing business. We need to keep working on it.
• If customer convenience is a piece of your strategic planning, then new branch locations are a chance to grow. It’s all about gathering deposits. Branching is an expensive strategy, but it offers relationships and a chance to cross-sell that you don’t have at an ATM.
• People thought Internet banking would take over the world a few years ago, and it is a great delivery system. But we’re putting some money back into bricks and mortar, too. You’ve got to do both.
• Another approach is to add branches via acquisition rather than building de novo offices. It takes time to build deposits and gain a customer base in a new area.
Advancing a Career in Banking
• Get involved in the community. It’s rewarding personally and professionally and becomes a value to pass along to others.
• Cross-pollination between different areas of the bank is also good. People who migrate from credit to sales and other areas of the bank get a grasp of the whole and develop more relationships. Finding a mentor also helps.
• People skills are key, both with customers and with coworkers. Banking is such a complicated, technical business and we’ll never be experts in everything, especially these days. It’s important to be a team player. That takes time and experience. Young people need to know it’s not a sprint – it’s a marathon.
Attracting Young Talent
• Banks could probably do a better job of attracting young talent. We tend to build with our bench and may lose that outstanding young graduate from Bowdoin or Bentley or the college next door.
• We have to remember that young people are eager to learn and get ahead and are not afraid to make mistakes. They want to be challenged, take on more responsibility. We were a little more conservative as young people.
• Management training programs of the past turned out cohesive groups of young people who had become friends and who had been instilled with the culture of the institution. They spread out into all areas of the bank. Later, when banks began to merge, there were seasoned veterans in the marketplace for hire, and they began to get the jobs instead of the young people. Nowadays it is hard to justify the cost of a management training program. We need production from every single body.
Highest Level of Portfolio Risk
Nationally it seems to be residential real estate, and the variable-rate loans pose the greatest risk. While there may be some slowdown in Maine, we don’t expect a huge problem here because we didn’t have as much price inflation overall as some other states. We’re also coming off a good stretch of asset quality, so we’re probably all right in the short run.