38 SEPTEMBER / OCTOBER 2020 Navigating Uncertainty While creating a path forward Sean C. Payant, Ph.D. Chief Consulting Officer Haberfeld spayant@haberfeld.com Haberfeld is an associate member of the Indiana Bankers Association. In times of uncertainty, organizations have a tendency to put the brakes on, losing sight of long-term strategic initiatives and established growth goals. History has taught us, however, that decisions your bank makes today will have lasting implications for tomorrow. Business as usual will return, and our strategic initiatives and growth goals will still be there. The key is to stay focused on growing core customers, regardless of the economic environment. More Customers Cushion Profitability Having more customers is one of the best ways to guarantee strong performance in all economies. Banks executing a growth strategy consistently have up to two times the number of customers per branch when compared to industry averages. To get a picture of how customers impact bank performance, we need to turn to data compiled during the Great Recession of 2008. For context, the average bank has approximately 1,100 retail and business checking customers per branch. Banks consistently executing a growth strategy have approximately 2,200 retail and business checking customers per branch. An analysis of the data illustrates the impact core customers have on return on assets and return on equity. We learned from the Great Recession that banks that stayed focused on growth remained stronger. While everyone was challenged, Graph 1 shows that growth-oriented banks fared much better. ROA declined less than the industry average (26% for growth-focused versus 56% for the industry), and ROE followed the same trend. Just as important, those banks that stayed the course through the crisis also came back stronger on the recovery side. While nothing can completely insulate your bank DIRECTORS / SENIOR MANAGEMENT GRAPH 1
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