“I’m not afraid of anything in this world…
There’s nothing you can throw at me that I haven’t already heard.”
– U2
So here we are – the first week of January 2002. The champagne headaches have worn off and spouses all over America are arguing about who should take down the Christmas lights. For bankers, the headlines don’t seem to be ringing in the new year on a high note:
It’s enough to make you want to stock up on beef jerky and head for the hills. But wait! Instead of survivalism, it’s time for bankers to be inspired by John Belushi’s famous words in Animal House:
“What’s this lying around crap? Was it over when the Germans bombed Pearl Harbor?”
Bluto’s right. Now is the perfect time to fire up and think like a contrarian.
So let’s put on the rose colored glasses and look at six major reasons why GonzoBankers should be gearing up for new opportunities:
Since about 1997, the M&A game in banking has been over-priced, and it has under-delivered. With tough times on the horizon, bankers can expect better value in their acquisitions. Anyone remember the “bad” times of the RTC days? Banks were buying deposits for pennies, and secured real estate loans sold for 60% of book and 12% cap rates. As investment banker Eric Hovde often says, “Banks who keep their powder dry will have great opportunities in the bad times.”
During bad times, bankers like to quickly spread word of how bad things are to all their borrowers. Talk about your motivational speakers. Then we begin to treat every borrower as the jerk who caused last month’s charge-off. Our decisions take longer and we bury long-paying customers with new information requests. In the process, we spread our own fears into every industry in the economy.
Most bank customers will not go belly up, and our good customers will have the same “value” acquisition opportunities as banks do. Don’t we want to be financing the strong players who will be expanding while competitors are crying in their beers? Bad times are the best time for banks to prove they are, indeed, a “partner” to strong business customers.
2001 was a major crummy year for technology. Lots of dot.com refugees and major layoffs from the systems and consulting firms. What an opportunity. The banking industry has been starving for technology talent and aching for some of the marketing creativity that the dot.coms produced. Now, with worthless options and BMW leases to cover, these refugees are becoming quite interested in a stable industry that earns nearly $20 billion a quarter. GonzoBankers need to use the downturn as an opportunity to bring more technical and creative talent into the industry.
One benefit of the stock market slump: all the money is no longer flowing like a fire hose into Schwab and Fidelity. Bank money market accounts now easily match rates being paid by the mutual funds. The consumer is no longer checking stock quotes every hour to see if Cisco is up (it’s not). Now here’s the banking industry’s chance. For the next two years, it’s time to play catch-up on product development. It’s time to better integrate banking and brokerage services and make damn sure we have the products and services to retain the business customer. Brokers have retreated. They will be back.
2002 is a great year for banks to get cheap. Not massive layoffs that make no sense. I’m talking about questioning the dumb stuff we were all too busy to spot when times were good — maintenance contracts, leases, cell phones and low performing managers. Get ’em out! Here’s one best practice: Commerce Bank of New Jersey pays employees $50 for every stupid policy they identify in the organization that gets repealed.
2002 is not a year of grand strategy and competitive upheaval. It’s a year requiring heads-down execution. The bankers I speak with tell me that there are still a number of strategic projects that need to be addressed before more “vision” is piled on their plates. For instance:
INTERNET BANKING – We’ve installed it, but have we reached our customer penetration goals? Is it working at the functionality levels our customers need?
CASH MANAGEMENT – We say it’s important, but are we really putting the resources and management focus into the product line, sales force and referral processes that will make this happen?
BRANCH PROCESSES – This is a hot button for my partner Terence Roche. The year is 2002 but you would never know it by the amount of paper, redundant re-keying and manual tracking that occurs in the typical bank branch. Before we put our hopes on another sexy technology, we should clean things up for our front-line employees.
INTRANET AND WORKFLOW – The real action for Internet technology over the next few years will be in using the Web to kill every paper form and report in the bank. Reengineering is coming back with intranet technology driving it.
TRAINING AND INCENTIVES – GonzoBankers won’t do the knee-jerk thing and cut these budgets right now. Instead, they’ll take a fresh look at these programs and gear them toward future growth.
It’s time for bankers to think like contrarians and benefit from the rocky times we are currently going through.
So GonzoBankers, if anyone asks you how things are going these days, just shout to them: “Things are going greeeaaatt… and they’re only gettin’ better!” -spw