How To Improve Your Bank Revenue

Transcription

1 Revenue Reengineering and Increasing Non Interest Income presented by Tim Holt

2 What can we learn from vs.

3 Current Trends Service charge income Interest margins Non-performing loans Regulatory changes

4 Current Trends

5 Current Trends Why do customers switch banks? FEES Why do customers willingly pay fees? GOOD SERVICE 2012 U.S. Bank Customer Switching and Acquisition Study J.D. Powers and Associates

6 Current Trends Industry analysis shows fee revenues on transaction accounts are up nearly 15%! but not at banks. Billions $70B $82B $48B FDIC Service Charges on Deposits FIs $44B FDIC Service Charges on Deposits FIs, PayPal, Billers, Others Source: FDIC, Our Analysis; Banks and CUs

7 Current Trends US bank deposits 12.4% Community bank deposits 16.7%

8 Retain Core Deposits Onboarding Single account holders Bundle Debit card Business customers Educate 8

9 Revenue Reengineering SMALL BUSINESS SENSE 21.7 million business with <100 employees; 99.7% of American businesses Revenues from $50,000 - $10 million 95% have a checking account; 60% a line of credit, loan or capital lease (40% a loan). Checking balances are 3X more than consumer accounts. 76% use same bank for business and personal Credit card growth projected at 9%

10 Revenue Reengineering Volume and consumables Monthly service fees New services /fees Activity fees Transaction revenue Re-visit revenue sources Non-traditional revenue sources

11 Current Trends 11

12 Current Trends 12

13 Revenue Reengineering Don t give up on ODP

14 Revenue Reengineering Enhance Free Checking and Debit Card Incentives Revenue per DDA account is $199* ($225 w/spread): $134 for NSF/OD $37 for interchange $28 for other fee income Durbin only puts 15% of revenue at risk

15 Revenue Reengineering The Suite Spot 10% of relationships are profitable Analyze customers for profitability NIM on average balance(s) Fee income Multiple relationships Cost per account

16 Revenue Reengineering Change your thinking about PIN PIN more profitable than Signature because: PIN interchange = $0.16 plus NSF plus foreign ATM = $0.84 Signature = $0.33 interchange plus ½ of other fees = $0.65

17 Revenue Reengineering Consider Prepaid and Reloadable A debit card only relationship is replacing the traditional checking account Popular product for college students (parents) and transient workers There is demand for this revenue producing service Performance history indicates direct deposit GPR will last 18 months or more and generate between $15 - $20 per month revenue Payroll and prepaid (non Direct Dep.) $8 - $12

18 Revenue Reengineering Enhance tracking and collection

19 Revenue Reengineering Loan payments Review and enhance loan fee structure Origination fees - % of principle Doc Prep and/or processing fees - $300 range; even for renewal The rate myth Cash management services

20 Other Considerations Cost of funds Sub 1% is new target for best practice The run to safety has given us a temporary opportunity Investigate market opportunities to differentiate terms for CDs Consider a higher yield checking product packaged with a monthly maintenance fee (override possible) and bundled services Get your excess out of Fed Funds

21 Other Considerations Cost of funds National Average = 45 basis points Illinois Average = 40 bps Ohio Average = 37 bps West Virginia Average = 63 bps

22 What can we learn from vs.

23 9 Annoying Bank Fees Forgetting to update your address Cashing in your coins Talking to a human Losing your debit card Getting a paper statement Requesting old statements Receiving money Redeeming award points and the number one annoying bank fee is

24 9 Annoying Bank Fees Closing your account What is missing from this list?

25 Approaches Build analysis framework around customer usage patterns

26 Approaches Metrics Checking accounts should generate $250 of revenue per account to ensure profitability ($200 in fee income) Total service charge income in 2012 increased (less than 1%) for the first time in 3 years The average service charge income to average assets is.24% ; total NII 1.77% FI s over $1B in assets slightly higher

27 Approaches Understand your competition Are you a market leader or follower? How fast can you respond/implement? Outline potential impact of loss of accounts Implementation constraints and costs Big bank vs. community bank image Non bank competitors

28 Approaches Customer Profitability - Determine Implementation Strategy Establish 3 to 4 segments of profitability Protect top 10% Move bottom 50% (typically 2% of $ s) Establish account suite and target type by customer Notify profitable accounts of account change and allow option or account choice

29 Approaches Small Business Identify your best small business customers Develop an optimum profile Survey existing customers for product ideas Develop a target prospect list including those banking with regionals and/or troubled banks Train and staff high opportunity areas with sales/support focused on small business

30 Approaches Technology and other implementation components Assess core processing system Assess transaction systems Understand the impact Build an integrated implementation plan

31 Approaches How are your associates acting? Will they recognize the opportunity to serve?

32 Training Unconscious Incompetent Conscious Incompetent Conscious Competent Unconscious Competent

33 Approaches Training Train your customers Provide financial counseling as a service not an obligation Provide your employees with the knowledge they need Lead your employees to the service culture that is right for your organization

34 Approaches Key steps Analyze your customers (and fire some!) Survey competition Assess your ability to implement including technology, process and training Create an array of products to meet needs of key segments

35 TIM HOLT Office: N. Washington Blvd. Ste. 420 Sarasota, Florida