Turning Your “Lenders” Into Fierce Deposit Warriors For the last 20 years or more, banks of all stripes have been encouraging their commercial bankers to break out of the mindset that they are purely commercial lenders and to work with business customers more holistically. This process was hastened by two industry developments. Firstly, the financial crisis of 2008-2009, partially in response to regulators’ concerns, there was a push to deconcentrate in commercial real estate (CRE) within customer portfolios. Second, the SVB/Signature/First Republic meltdowns in 2023 created a deposit crisis as core commercial deposits left the banking system at the same time as the glut of PPP funds worked their way through and out of many banks. What’s In a Name?: The first thing that many banks did to address this issue was to change the title of their commercial bankers from “Lenders” to “Relationship Managers” (RMs) or something close thereto. This symbolic gesture did little to change behavior or self-perception, and the bankers still think of and call themselves lenders. Culture Eats Strategy for Breakfast: No matter what they are called, it is how they see themselves that is paramount. Self-perception can be enormously important in creating behavior. The annals of business history are strewn with examples of industry-leading companies that almost faded into oblivion because they never quite figured out what business they were in. Examples are: • The Pennsylvania Railroad thought it was in the railroad business rather than the transportation business. • The Saturday Evening Post thought it was in the magazine business rather than the advertising business. • Kodak thought it was in the film business rather than the imaging business. No matter what the strategy or how much authority is put behind its implementation, culture virtually always prevails. The classic example of this phenomenon is the fact that, despite the outcome of the Civil War and the passage of the 13th, 14th and 15th Amendments, reconstruction in the South was a miserable failure. It took another 100 years to achieve even a semblance of racial equality thanks to cultural resistance. For the successful commercial banker today, the primary mission should be to help their customers grow and be successful. That success will likely depend on a variety of banking services including loans, deposits, payments, treasury services and, depending on the bank’s offerings, insurance and investment products. Building a Better Banker — The Holistic Approach: It’s essential for commercial bankers to have at least a working knowledge of the breadth of products that the bank offers. Because we know that loans are usually the lead product in a banking relationship, lending expertise is important but far from the only priority. Training should include direct questions to ask when meeting with the prospect. For instance, an effective question is, “You probably know what your borrowing interest rate is, but do you know what you’re paying in fees each month for cash management services?” The typical business owner/controller/CFO is often clueless when this question is posed. Targeting Wisely: Most commercial bankers have a deep knowledge of the traditional industries that produce the bulk of C&I deals, manufacturing, wholesale and business services. When it comes to mining deposits, however, mother lodes are often found in those industries that are deposit-rich, often to the exclusion of any lending relationship. Topping the list are property management, title companies, homeowners’ associations, attorneys, education, not-for-profits and municipalities. Many C&I bankers have neither the industry knowledge nor the contacts in these highly productive industries. One of the real silver linings of the COVID-19 pandemic is the availability of PPP loan data. While the SBA makes this data available at no charge, it requires significant improvement. The only data points that the SBA provides are borrower, lender, industry and loan size. The data needs to be enriched by appending the other information essential to wage a business development campaign. In the past, the only way to target a particular competitor that was being acquired or in some other way stumbling was to obtain UCC By Theodore A. Rosen, President Expert Business Development LLC, ICBC Associate Member 24 | INDEPENDENT REPORT
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