Author Archives: mronan

Huntington on track to meet small business lending commitment

At the start of 2010, Huntington Bank committed to lend $4 billion over three years to small businesses in its footprint, joining leading banks like Chase, Bank of America and Wells Fargo in making specific small business lending commitments.

Huntington reported yesterday in a press release that it lent $1.1 billion to small businesses in 2010, with an acceleration in this lending in the second half of the year, which the bank attributed to an improving economy as well as the completion of its hiring of 150 additional business bankers.  Huntington claims to be on track to meet its three-year goal.

This press release follows news in recent weeks that Chase and Bank of America both met their 2010 small business lending commitments.  Wells Fargo fell short of its target, although it still grew small business lending by 15% in 2010, and reported strong growth in loan demand from small businesses in the second half of the year.

It should be noted that small business loan balances for many large banks continue to decline year-over-year, as charge-offs and paydowns outstrip origination.  However, we may be on the cusp of an inflection point , with declining charge-offs and increasing originations leading to overall growth in small business loan portfolios in the coming quarters.

The sales and marketing challenges for banks aiming to capture a share of the small business market include:

  • Positioning themselves as a financial partner to small businesses, providing both financial products and advice
  • Revisiting the small business product portfolio to ensure that it addresses the changing financial needs of small businesses
  • Developing offers and bundles to reflect banks’ renewed focus on relationship optimization
  • Ensuring that all service channels (branch, call center, Internet, mobile, social media, etc.) deliver a consistent customer experience
  • Recruiting, training and developing support tools for dedicated business bankers
  • Implementing programs and process for other branch personnel to sell to small businesses and/or refer them to business bankers

Citi retail banking/card reorganization illustrates importance of having strategy and structure in synch

An article in Dow Jones Newswires yesterday reported that Citi has reorganized its U.S. retail banking and credit card operations, in order to improve sales and service.  The reorganization is based around customer segments, product development, and distribution.  In announcing the reorganization, Citi acknowledged that its previous structure was too product-centric.

In recent years, banks have emphasized their renewed focus on relationship banking.  These banks are now starting to understand that, to achieve their vision of relationship optimization, strategy and structure need to be in synch.  Benefits of having customer-based organizational structure:

  • The company has a much greater ability to anticipate, and react to, changes in the marketplace
  • Customer ownership rules are more clearly delineated
  • Product development starts from the perspective of the customer rather than the product
  • Employee compensation is based on the attainment of customer-focused metrics (acquisition, retention, lifetime value), rather than reaching sales goals for products that may adversely affect long-term relationships
  • Sales teams become more specialized around different segments, develop a more holistic understanding of customer needs, and can present more comprehensive solutions.  Training and sales support are also recast to focus on segments rather than products

JPMorgan Chase commits to the branch network

About a year ago, Bank of America announced that it would close up to 10% of its branches in the next few years.  Some industry commentators interpreted this as signalling the demise of the bank branch.  In a previous blog, EMI argued that this was not the case, but that the role of the branch is changing, with other channels handling a majority of day-to-day transactions, and with branches increasingly used for complex transactions that require face-to-face interaction.

Banks’ continued commitment to the branch channel was highlighted in JPMorgan Chase’s Investor Day presentations this week.  Some branch-related takeaways from these presentations:

  • JPMorgan Chase opened 154 new branches in 2010, expects to open 225 new branches in 2011, and plans to add up to 2,000 new branches in the next five years (more that half of which are planned for its key growth markets of California and Florida)
  • Branches accounted for 35% of new credit card account production in 2010, up from 11% in 2006.  Branches are now Chase’s largest credit card acquisition channel

In addition, JPMorgan Chase has adapted to the changing role of the branch by hiring more sales specialists.  According to its latest quarterly financials,  Chase personal bankers rose 21% y/y to more than 21,700 in 4Q10.  Sales specialists grew 22% to almost 7,200.

As banks recommit to fostering long-term relationships with their customers, they see branches are playing an integral role.  From a sales and marketing perspective, key challenges include:

  • Ensuring that the customer experience is consistent across all service channels (branch, call center, online, mobile, etc.)
  • Changing branch layouts
  • Training and providing support tools to new and established branch personnel to adapt to the new role of the branch
  • Communicating the wide range of services available in branches to customers and prospects