Chief Investment Officer
Commercial Loan Automation
BirdsEye Viewcommercial banking
One sentiment is expressed consistently across all our Forums: loan demand borders on the non-existent. Cadres of relationship managers have been relegated to workout specialists as the highest priority remains cleaning up asset quality woes. And, even if this weren’t the case, there are no loans to be had.
As usual, I see a thick silver lining in this cloud, and would like to share with you what I perceive to be unique opportunities for commercial banking in this dismal environment.
More customers are “in play” than ever before. True, not that many commercial customers are borrowing. In-line utilization is frighteningly anemic. But so many banks are inward-focused, tending to their wounded loan portfolios, that it is inevitable that their customers are interested in taking a fresh look at their banking relationships. The most recent Greenwich study says that even Centers-Of-Influence, i.e. accountants, attorneys etc., are recommending to their clients to re-examine their bank relationships. The traditional fear of switching banks during a recession is still strong, and yet opportunity exists across the board to take customers from weaker banks and from those big banks which have bigger fish to fry.
Mega-banks continue to redefine their sweet spot, which often means that their crumbs are the community bank’s rich clientele. I realize that when a large bank wants to win or keep a relationship, they have more muscle to do so than anyone. At the same time, community banks find profits and longevity of relationship among the companies with fewer than 150 employees, which many of the mega-banks consider below their level of interest.
Besides, isn’t it time that we truly fulfill on the moniker “Relationship Banker”? If there are no loans to be had, there certainly still are customers to be wooed! This means that the time to structure and act upon a disciplined calling effort on target commercial customers, both borrowers and non-borrowers, is now. Many commercial bankers pride themselves at being outstanding sales people. However, it is far easier to give money than to get it, and today’s customer is far more interested in managing their cash and lining up credit for future needs than in borrowing for today. RMs can use the support and structure that strong sales management offers, and their managers need to give the process some thought.
At a recent Commercial Banking Forum I was delighted to learn that some banks, notably City National Bank of California, have discovered the joys and effectiveness of sales management. It doesn’t have to be all drudgery and form-filling. Further, commercial bankers are open to having fun and thinking about their business in out-of-the-box ways.
Traditional sales management techniques, including sales rallies, team building exercises such as scavenger hunts, friendly (and even not so friendly) competition and fun activities are no longer beneath the strong commercial banker and their management team. Quite the opposite; RMs are looking for ways to re-energize, and progressive commercial banking management teams are adopting sales management practices to achieve that goal.
Dare to drive your RMs to expect more from themselves and from their customers. It is not unreasonable to aim for 8 relationships per borrower. It is even more reasonable to expect their personal business as well as their commercial accounts. Yet too often we do not require such strong cross-sells, and we rarely include that aspect in their incentives.
There is no better time to raise expectations for deepening commercial relationships than today and 2011. Ask for more, and reward both customer and banker if they give you more of their business. Much like the retail business, there is a direct correlation between customer profitability and the number of products they have with us. Specifically, a typical commercial customer with a single service is worth $1000 of annual profit to most community banks, +/- $250. A commercial customer with ten relationships is often worth 100X that amount.
Strong relationship-oriented banks know that it is possible and appropriate to expect such strong wallet penetration among commercial clients. There is no reason not to require your RMs to sell real (vs. token) operating accounts, positive pay and other excellent commercial services to those customers who need them – and who doesn’t???
They say “all banking is local”. This is certainly true in commercial banking. That’s the first advantage strong community and SuperCommunity banks enjoy. You have loyal customers that will likely give you the last look, especially if you did not turn over their RM too often.
· Establish a disciplined sales management process
· Make it non-negotiable
· Prioritize prospect and customer lists and calls
· Target specific industries to improve your value proposition and demonstrate expertise to your prospects and customers
· Compensate for cross-selling and relationship deepening
· HAVE FUN!!! Even respectable commercial bankers like it J