40 MARCH / APRIL 2022 Many financial institution executives spend considerable time thinking about strategies to improve overall profitability and create sustainable growth. The focus across industry press and conference best practices is generally aimed at strategies to cut expenses – using technology, looking at staffing levels, increasing productivity, etc. Although this advice is sound, is that actually what high-performing banks do? To answer this question, we looked at 81 institutions which have been in the top five for return on equity for five consecutive years and compared them to peers. These high-performing institutions averaged an efficiency ratio of 52.04%. As the data illustrates, high-performing institutions don’t attempt to save their way to prosperity. They underperform in noninterest expense to assets by 24% to overperform in noninterest income to assets by 325%. How does your bank stack the deck in its favor? The key to better results is aligning marketing and execution. As noted by high-performing banks, it’s about making an investment in growth to create a sustainable advantage that produces superior results. After 35-plus years, here’s what we know: Product – get product right. People hate fees. Compressed margins and decreased profitability can lead to the discussion of increasing monthly service fees or minimum Secrets of HighPerforming Banks balance requirements. The chart below shows recent research on the criteria consumers use when selecting a primary financial institution. Compression in bank earnings will continue to have little impact on what consumers desire from their banking partners. Your retail and business product considerations must remain compelling if you want to have the greatest opportunity to grow core customers. Processes – remove barriers. Stop getting in your own way. While we must be in compliance, excessive compliance creates barriers. Look at your customer identification program as well as your retail and business account opening policies: - Do they create barriers to growth? - Is it easy for a consumer to open a retail or business account at your bank? - Do you have restrictive scoring metrics that are actually costing you revenue opportunities? Sean Payant, Ph.D. 'LMIJ 7XVEXIK] 3JƤGIV Haberfeld sean@haberfeld.com Haberfeld is an associate member of the Indiana Bankers Association. DIRECTORS / SENIOR MANAGEMENT
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