Whew. Now that, as they say, was a freakin’ year. Does anybody else out there feel like you’re George W at a podium and all you’ve been doing is dodging incoming shoes for 12 months? We’re staggering into the Christmas holidays and there are just a few more things to get out of the way before we flush this year, and we mean for good.
Up the rum to 151 proof before spiking the Christmas nog? Check. Take this year’s bonus and figure out which way to bet the over/under on the Orange Bowl? Check. Take deep breaths, assume our favorite lotus position and try and brace ourselves for this year’s version of Aunt Gertie’s three-color Jell-O salad? Check. Hide the mistletoe before the suspiciously touchy, friendly, in-laws stagger in for the Christmas Eve bash? Check and double check.
Only one thing left, then. You’ve crawled through the desert and you want to see the oasis. Check. We have it for you yet again – the 2008 Gonzo Awards, version 8! Time once again to applaud what went well, poke a little fun at what didn’t, and point out the nutty and unfathomable events of the year. No shortage of material this year, to say the least. But you know what? We’re all here, we’re all still kickin’, and we’re ready to knock 2009 on its sorry derriere. So before the Christmas rest and rejuvenation, enjoy our take on 2008.
The Biggest Economic Surprise of the Year (Again)
Last year, Gonzo was surprised with a 3.90% 10-year treasury; you can imagine the eggnog that went through our nostrils now that it is at 2%!
Cellar Dweller Award
The Fed Funds rate at 0.25%
The Party Most Responsible for Our Economic Crisis (TIE)
The Most Innocent Victims of the Economic Crisis (TIE)
Bank Deal of the Year
Wells Wins Wachovia for a Song (and some assumed credit risk). Underneath the hell of stated income loans from World Savings and a lot of other bad financial engineering decisions, Wachovia had one hell of a footprint and deposit franchise. Great to see 65-year-old Wells Chairman Dick Kovacevich reinvigorated like a frat boy at a Tri-Delt exchange to make this integration a success.
Most Ridiculous Attempt at an Acquisition
Citibank pining for Wachovia. Here’s a “too big to fail” thug that has the audacity to think it can merge with Wachovia a month before they take $25 billion in TARP money then an additional $20 billion handout from Hank. One damning indicator of this franchise’s quality is that community bankers across the East were cheering for Citi to win the Wachovia deal vs. Wells. Community bankers knew that picking off talented employees and key customers would be easier with the undisciplined and unfocused Citi at the helm.
Stand-up Banker of the Year Award
Goes to Berkshire Bancorp Chairman Moses Marx, who injected $60 million of his own money to save his community bank after its capital was severely impaired from an $82 million loss from (you guessed it) Fannie Mae stock. Nice to see a leader believing in his company.
The Sooner Rather Than Later Award
Goes to Tom Callicutt at Whitney Bank for his diligent efforts at keeping the bank’s Strategic Planning project on schedule and moving forward.
Best Evangelist Message from a Bank Award
Goes to ING Direct for issuing its Financial Declaration of Independence that has now been signed online by nearly 16,000 consumers. This is exactly the message that banks and credit unions should have been pushing for the past decade. Arkadi Kuhlmann deserves a tip of the hat for the passionate message he and his team are sending to American families.
The Good Swing at Innovation Award
Goes to six credit unions who partnered with Zopa but saw the partnership fizzle. Our hat goes off to Doug True (FORUM Credit Union) and others who are willing to take risks with new ideas.
Bank with the Best Business Case Award
First Citizens Bank of South Carolina. While most banks pour money into I.T. projects on faith and emotion, CIO Bill Loadholdt and the folks at First Citizens have created a disciplined process with measurable objectives required on new I.T. projects. Nice to see a best practice process actually working.
Busiest Employees in 2008
The signage and stationary folks at First Republic Bank, San Francisco. First, this great bank gets nabbed by Merrill Lynch for a nice premium and then B of A takes Merrill. It’s been a wild couple of years for the Bay Area’s top private bankers.
Best Temp Job in the World
Alan Fishman, final CEO at WaMu. Fishman was paid just under $20,000 a week and also got a massive signing bonus of $7.5M, plus 612,500 shares of (okay worthless) WaMu stock. According to this bloggingstocks post, Mr. Fishman pocketed somewhere between $11 million and $18 million for his three weeks on the job. Wow.
Most Outrageous Gonzo Bank Holding Company Conversion Award
Goes not to GMAC, but rather to Family Dollar, Dollar Tree, and Dollar General for having names that sound like they may have systemic risks.
Gonzo Spiral of Death Award
Sheila Bair for increasing FDIC insurance premiums on struggling banks just when they need those earnings to keep from failing and having to tap the insurance fund.
Most Overbanked City-Per Capita
Blackwater, Missouri. With a population of 199, Blackwater has two banks and two ATMs.
The Value of a Strategy Award
Goes to Silicon Valley Bank for its strong performance (2.18% ROA, 23% ROE, 35% deposit growth, .14% non-performing assets) during a tough 2009. Though many perceive the bank’s high-tech niche as “high-risk,” this focused player has less than 2% of its loans in commercial real estate and has avoided much of this year’s credit mess.
The Focus on Your C&I Award
Goes to Bank Rhode Island, which has seen consistent and solid 20%+ C&I growth in the past three years since experienced banker Mark Meiklejohn joined CEO Merrill Sherman and her team.
Business Model Experimentation Award
Mark Shobe, CEO of DFCU Financial, Dearborn, MI. This credit union has received a ton of local market attention for paying a full ½% to members for their loan and deposit balances. Talk about your rewards progam! Check out how this auto-belt institution is fueling growth.
What a Difference a Year Makes Award
This one goes to Vernon Hill – from shucking CDs to ducking C&Ds…..
Green Marketing Move Award
BankAtlantic and Fiserv team up to plant up to 10,000 trees in Florida – one for each new electronic bill pay user at the bank. It’s gimmicky, but who cares given the potential results? See the press release.
The “Where’s Waldo?” Branding Award
Amplify in Austin, Texas, wins as it completes the morph from a mild mannered organization to a remote transaction machine with a hip new name and a lot of cool technology online.
Graffiti of the Year Award
Goes to this defamed WaMu branch lamenting our October financial crisis.
Great Moments in SEC Enforcement, Part 53281
With all of the problems on Wall Street and losses suffered by millions, the SEC took time out of its busy schedule to punish P2P lenders such as Prosper and Loanio for not registering under the Securities Act. Consumers didn’t need another avenue to find credit these days anyway, right? Thanks for saving us from Financial Armageddon, guys!
At Least Somebody’s Helping Consumers
As consumers tighten up on spending, non-bank upstarts Mint and Wesabe continue to round out their personal financial management feature sets, helping consumers manage their spending and savings for free across all of their financial providers. Users help each other with tips on spending and saving and can discuss financial management in various forums. Quicken Online has responded by making its offering free, and the major Internet banking vendors have expanded their personal financial management feature sets in the past year.
Best Gen Y Research by a Financial Institution
Goes to the folks at Idaho Central Credit Union who hit the streets with the video cam to create an interesting and hilarious first-hand account of the Facebook crowd.
Retail Delivery Flameout of the Year
Decoupled debit cards. This baby has gone from talk of payments revolution to an EKG flatline. But cheer up, Capital One. As Neil Young would say, “It’s better to burn out than to fade away.”
Retail Strategy Struggling to Find its Mojo
Debit reward programs. Only a third of banks have these programs today, and, so far, existing programs aren’t getting the market share impact that was anticipated.
Top Financial Writer of 2008
Dan Balaban of Cards and Payments magazine. If you want to stay abreast of emerging card and mobile payment trends, Dan is doing an excellent job, delivering articles with beefy statistics and thoughtful analysis.
The Most Critical Process at a Bank That is Perpetually Ignored Award
Capturing and maintaining accurate customer information. How can banks talk so much about the value of customer intimacy and spend millions on CRM systems while dumping responsibility for managing this information to clerical positions in the back office?
The Gonzo “You Get What You Deserve” Award
Goes to the large banks and credit card companies for new credit card regulations. When an industry abuses its customers to squeeze out the profits, a regulator is certain to come along and do something. Maybe we should follow some business principles next time because now everyone is shouldered with the extra regulatory burden.
Great Lines from Bankers
Gonzo Technology of the Year
Server virtualization and replication. While these innovations address the boring “plumbing” of I.T., banks have been able to build cost-effective and reliable infrastructures using these technologies. From server consolidation to in-house high availability for disaster recovery, the growing power of the wide area network takes this year’s Gonzo award.
Technology Growing in the Petri Dish Award (TIE)
Mobile banking, online account opening, consumer remote deposit capture and online PFM. We have some nice ingredients here, and banks are starting to buy. However, nothing interesting has grown so far – most notably actual consumer usage of these products. Today, these technologies fall into that bucket of extremely costly on a “per active user” basis. Let’s hope this year’s Petri dish growth turns into some real living organisms in 2009.
Back-fill ROI Award
Online account opening initiatives were rampant in ’08, however, due to a lack of adoption (go figure), many institutions are justifying the high implementation costs by rolling the product out to the branches.
The Biggest Technology for 2009
Data management and analytic tools. Gonzo predicts banks will jump more eagerly into data warehouse, loan portfolio analytic, profitability management and customer analytic applications as they try to squeeze out every ounce of improved performance possible. Case in point: the sales force at SAS is very busy with bankers right now.
The Whatever Happened to… ? Award
Goes to Linux and Open Source in banking. Last time we checked there was still a boatload of Microsoft invoices going out the door on a regular basis. Bill still owns us.
Technology Searching for a Problem Award
Remote deposit capture from a cell phone. Is anyone except a fraudster so desperate to scan a check that he can’t wait until he’s near a home printer? We don’t think so.
Most Pitiful Attempt at Leveraging Technology
Bank departmental usage of the intranet. Other than the I.T. group’s use of SharePoint, online payroll/benefits and canned intranet packages, we see very little creativity coming out of the business areas within a bank to leverage Web technology.
Quietest Place in Cyberspace
Bank blogs. Turns out the Facebook crowd would rather watch Beyonce shake to “All the Single Ladies” or a new Mr. G clip than hear about a new checking account.
Most Outrageous Cyber Attack Yet
Hijacking of the CheckFree Billpay domain by a Ukranian server for eight hours on 12/2/08. Why do we feel like Boris and Natasha from Rocky and Bullwinkle might be involved here?
The Sleeping Giant Award
Goes to larger regional banks that are finally starting to see the benefits of simplifying their I.T. environments by dumping custom legacy systems for outsourcing or packaged third-party software. Here’s to eliminating a few million lines of code, boys, and faster release cycles.
Bank Core Deal of the Year
New York Community Bank selects the Fidelity MISER product. Save the “Yeah, but’s” and the drama for your mama – this was a bigee.
Credit Union Deal of the Year
OSI signs BankFund Staff CU. Nice work, guys!
Golden Cufflink Award
The “You Had Me at Hello” Award
IPS Sendero Duo Team of Bertrand Laurent and Brian Dart. With his sexy French accent, Bertrand gets the presentation started with a brief, articulate corporate overview and then introduces the always entertaining, Brian Dart. There’s no way to describe the excitement this guy has about the product. By the end of the session, he has the bank and the consultant wanting to sign on the dotted line.
Core Systems Conversion of the Year
Fiserv CBS successfully brings Associated Bank into the fold.
Vendor Term Least Likely to be Optioned by Hollywood for a Superhero Movie
Big Mo’ Award for Ancillary Systems
This one goes to Meridian Link’s online loan origination system. The momentum has mainly been in CUs, but the product is doing well thanks in part to its relationship with Symitar. When will banks and CUs (and consumers) be ready for ML’s online deposit account opening product?
The Mel Kiper Award for Best Performance in the 2008 Employee Draft
John Dawkins, Jimit Kapadia, Fran Kester and Kathy Groves are now riding the Symitar bus…
The Good Sportsmen Award
To the vendors that take it in stride when they’re featured as main characters in our Vendor Stew articles.
Best Chick Magnet in a Beard in the Bank Consulting Business
Scott Hodgins, Cornerstone Advisors, Inc.
Great Lines from Product Demos (or Synergy defined)
A major wireless telecommunications provider will announce an agreement with a major bank to allow SMS purchases to be directly debited from the checking account. —Michael Croal
– Just a year ahead of his time. Or two.
As Fiserv 2.0 runs wild, Corillian and CheckFree will be standard, tightly integrated offerings for all of Fiserv’s bank and credit union core products. Hey, a boy can dream, can’t he? —Scott Hodgins
– The dream lives on…
Web 2.0 will gain greater adoption within the financial services sector. With the launch of Zopa and its partnership with six credit unions, community banks will begin to panic and social networking sites will begin appearing on numerous bank Web sites by the middle of the year. Furthermore, MySpace will find a way to incorporate some form of financial services into its site, creating even longer term loyalty from its Gen Y customer base. —Tripp Johnson
– Hmmm. Not really. What’s Tripp doing out on MySpace all the time, anyway? He ain’t no Gen Y’er anymore.
The core system market will get more competitive. More new players than last year and more bankers looking than in the last five years. Open Solutions will be in the hunt again, after a year of BISYS-induced indigestion. ITI customers will be in their cross-hairs. —Bill McFarland
– Pretty solid. The bank industry did get more competitive. As for cross-hairs, that was too easy a prediction. We’d say that everybody had everybody else in them all the time – it’s somewhere between Wrestlemania 08 and outright cannibalism out there right now.
China, tired of dabbling around the edges investing in T-bills, pieces of banks (Morgan Stanley) and private equity firms, will send one of its top banks to the United States to either acquire a sizeable bank or de novo (most likely in the California marketplace). —Scott Sommer
– Maybe they’re just waiting for the post-holiday sale…..
Near-ubiquitous availability of text messaging, increased adoption of text messaging in the 25-44 demographic, and non-bank entrants in the space will result in SMS-based mobile banking having broader adoption than WAP and native clients combined. —Quintin Sykes
– God, all of us who aren’t too big in the tech side of the business were on pins and needles all year, breathless and on the edges of our seats to see if SMS slapped down WAP – not! Anyway, to the extent we even understood the prediction, we’d say mostly a miss and a standard has yet to emerge.
Most banks will realize that their high yield checking product is a losing proposition and will nix it. Those who don’t will go on believing that these price hungry customers are “potentially” their most profitable. —Eric Weikart
– Uh uh. Any negative comments about high yield checking programs is still fightin’ words to those who offer it, and never mind the math.
The foreign banks will go hog-wild with U.S. acquisitions in 2008. With many bank stocks losing 50% of their value and the dollar down more than 20% in two years, a billion dollar acquisition two years ago is effectively less than $400 million now. That’s a hell of a deal to expand financial services in the largest world economy. Scottish, Spanish, Irish, French, Italians, Chinese… look for acquisitions galore. —Steve Williams
– Well, given the year we had, they all decided to run from acquisitions like scalded dogs. Who wouldn’t have? Don’t rule this out as a very correct long-term prediction, though.
Finally, 8 years after the passage of the Check Clearing for the 21st Century Act (Check21), the last physical cash letter will be exchanged. All cash letters will be image-exchanged. Sadly, this comes only 2 years before the last check is written. –Michael Croal
There will be an increase in mergers and acquisitions with both banks and credit unions. –Anna Fernandez
I will again predict that there will be WAY more talk about large CU mergers than there will be walk. Some say CU mergers are slow to happen due to management/board egos. Some will tell you it’s due to CUs’ aversion to cut staff to make the numbers work. The real reason? No one with a voting interest gets rich from CU mergers. –Scott Hodgins
A new Internet banking provider will emerge and give the current providers a serious run for their money as many FIs decide not to renew their current contracts. –Tripp Johnson
In 2009 the large credit card banks will require a Congressional bailout because American consumers have revolted against outrageous rates, fees and interest calculation methods by paying off all credit card debt. NOT!!! –Bill McFarland
More financial institutions will go through the full RFP process for their core system but will remain with the incumbent after obtaining pricing concessions. –Santiago Patiño
At least one lawsuit will be filed by a community bank, credit union, or trade group based on decisions being made about who gets TARP money and why. –Terence Roche
Consumer adoption and revenue potential have been lukewarm so far, but on-the-go small business owners (and their valuable relationships) will lead the charge in increasing mobile banking utilization to the point where financial institutions consider it to be a “must-have” by the end of 2009. –Quintin Sykes
Attention Mortgage Shoppers – Look for Wal-Mart to push farther upstream in financial services in 2009. Given a continued lending pullback from banks and acceptance corporations, and the almost complete cessation of lending to lower-middle class borrowers, it should not be surprising to see Wal-Mart move into the banking mainstream with its usual discipline and precision. First-time home buyers go to Aisle 26 … Auto loans on Aisle 27, right next to the Tire Shop. –Ted Thames
Cost cutting initiatives will be on the minds of bankers again in ’09. One of the areas of focus will be cutting bill pay costs whether through contract renegotiations or looking at alternatives. Look for more FIs to look at bringing it in-house, especially the electronic piece. On the acquisition front, iPay and ORCC are at the top of my list. –Eric Weikart
The banking industry will get a gift in 2009 with an improved net interest margin. Because of nice credit spreads today and a lot of liquidity to be invested, the industry will see a 30bp margin expansion to more than 3.60%. This will help buttress some further loan loss provision that will be needed for increasing commercial real estate losses. –Steve Williams
For the past eight years, the team at GonzoBanker has tried to keep our industry smiling as it faces tough issues and the twists and turns of strategic change. As Mark Twain once concluded, “The human race has only one really effective weapon and that is laughter.” To all our valued readers and the amazing client base at our consulting firm, Cornerstone Advisors, Inc., we realize that laughter has been harder to come by this year.
Unfortunately, the banker’s reputation as an honorable professional, market disciplinarian and community leader was destroyed during 2008. It was hijacked by some rogue characters who fell prey to that human love for greed. But that’s not the whole story. It was also destroyed by the death of common sense that all of us allowed to sneak into our profession. Even if we weren’t making liar loans or swapping CDOs, we all share some responsibility for not shouting loud enough from the rooftops when greed showed up to throw wisdom and risk management out the door. Our industry as a whole has been too complicit in allowing fine print, penalties and fees extracted from American households to become our fastest growing profit center. We can and should do better. We can be the honorable industry that people want. 2009 will be the first year when new leaders will dust themselves off and work overtime to restore honor and credibility to the banking industry.
As our industry awaits for new leadership to emerge, we can all be inspired by words that Abigail Adams once penned to her son, John Quincy: “These are the times in which a genius would wish to live. It is not in the still calm of life, or the repose of a pacific station, that great characters are formed. The habits of a vigorous mind are formed in contending with difficulties. Great necessities call out great virtues.”
Happy Holidays and here’s a New Year’s toast to the growing wave of bankers who are planning for and willing to fight for the next “invincible summer in the depth of winter.”
The GonzoBanker Team
Go here to find out what album covers we would most likely hang on our walls as works of art.