Category Archives: Commercial Banking

Stellar Commercial Lending Growth for U.S. Banks

An analysis of leading U.S. banks’ first quarter 2012 financial results reveals strong growth across the board in average commercial loan balances. This growth is largely due to the economic recovery following the Great Recession. Of the 14 banks studied, 11 recorded double-digit year-on-year increases in their portfolios.

This growth momentum has been maintained in recent quarters, with all banks reporting growth in average commercial loans between 4Q11 and 1Q12, and five having quarterly growth rates of more than 5%. As with the y/y growth, quarterly growth rates were strongest for PNC (+11%, boosted by the acquisition of RBC Bank) and Key (+7%).

Bank are further boosted by the fact that most reported commercial loan charge-off rates declines over the past year. However, increased competition for commercial loans has led to most banks reporting declines in loan yields over the past year.  PNC’s yield on its commercial, financial industrial loans fell 53 basis points (bps) between 1Q11 and 1Q12.  Other banks with substantial declines in commercial loan yields during this period include SunTrust (-47 bps), U.S. Bank (-42 bps), KeyBank (-55 bps) and BB&T (-31 bps).

Banks expect that commercial loans will continue to grow over the next few quarter (barring an unexpected economic crisis) and are pursuing a number of approaches to grow their commercial franchises.

  • Targeting high-potential segments: A number of banks are focusing on particular industry segments. PNC’s overall commercial growth was driven by strong performance in lending to health care and financial services firms. Comerica’s energy portfolio grew by 62%, and its tech and life sciences portfolio increased by 38%. Banks are also targeting different business-size segments, such as middle markets (Chase grew its middle market loan portfolio 19% y/y).
  • Building commercial deposits and cross-selling commercial clients:  Capital One grew commercial deposits 15% y/y. And when banks bring in these new commercial deposit relationships, they then need to develop effective cross-sell programs. Huntington reported a 33% annualized increase in commercial deposits in 1Q12. It also claimed that 33% of commercial clients had 4+ products in 1Q12, up from 25% in 1Q11.
  • Encouraging commercial clients to increase line utilization. Line utilization declined significantly following the financial crisis, as businesses retrenched. Many banks reported that utilization rates remained relatively low in the most recent quarter, but some banks are seeing some improvement. Regions reported a 45 basis point increase in utilization.

Say “No” to the Third Helping of Meatballs: The Strategy and Pursuit of Trigger Campaigns

Launching a trigger email is a little like going back for seconds and thirds at an all-you-can eat buffet: just because you can doesn’t mean you should. The temptation to launch a trigger campaign becomes stronger in light of the steady drum beat of email marketing experts who tell you it’s the right thing to do. However, what all this talk of email marketing “best practices” loses sight of is that, like any marketing tactic, trigger campaigns should be a logical response to a strategic problem.

The good news is that there are trigger campaign approaches that align with many common issues — you just need to figure out which campaign matches your strategic need. For example, let’s say you are a company that has made or will be making a commitment to content marketing as a driver of customer and prospect engagement. Your business model requires you to nurture contacts over a period of time until they are ready/have the need to buy. During this interval, you need to keep your company and products top-of-mind, but your response data suggests that you are not maximizing your potential to engage your audience.

In this scenario, the best application of a trigger campaign is to use your target audience’s responses to drive deeper engagement. Leveraging your available content, you can create a collection of emails triggered by a range of positive responses — clicking on an email, downloading a white paper from your website, visiting your booth at a conference — that offer the recipient “next steps” or additional information. The keys to making this kind of trigger successful are:

  • Clean data: Make sure that the email address to which you are sending the triggered email is the email address of the person who took the positive action.
  • Low friction: Make the featured content easy to consume to lower barriers to incremental engagement.
  • Timeliness: Deploy the triggered email within a day or two of the positive action to ensure that whatever spurred the initial engagement is still fresh in the target’s mind.

In our experience, triggered campaigns targeting those with a positive recent response have delivered view rates in the 60-70% range and engagement rates as high as 20%.

A Customer Experience and Lead-Nurturing Horror Story

What you are about to read really happened. It illustrates why companies need to pay better attention to the customer experience and why marketing — or a dedicated customer experience function — needs to have visibility into all points of communication with customers and prospects.

About two months ago, I received an email from Ronnie, a salesperson at a call center technology provider. I’m sure he was emailing me because I had previously filled out a form to obtain a white paper. I read and deleted the email because EMI doesn’t handle provisioning or recommending call center technology and I felt that talking to the sales person would be a waste of both our time. A few weeks later, Ronnie sent another email; he speculated that I “might have overlooked” his previous email and again asked for a meeting. I know how not getting a “no” answer can be a drain on a salesperson’s time, so I decided to write back to Ronnie:

Hello Ronnie,

I didn’t overlook your last email…I read it and deleted it. But kudos to you on your persistence. The reason I deleted the email is that we are not in the business of using or even recommending to clients contact center technology. If a need should ever arise, I’ll look you up.

Good luck and good hunting.

Imagine my surprise — and by surprise, I mean aggravation — when two days later I received another email from Ronnie, this one more insistent than the last:

Anthony,
Trying to reach you. Can we schedule a call?

That’s the whole email. Makes you want to be a customer, right? I wrote back to Ronnie in a tone much less considerate than that of my previous email, explaining I had in fact responded to his earlier email and he should not email me again.

Guess what happened three weeks later? That’s right, another email from Ronnie — exactly the same as his second one. Needless to say, he got another email back from me, fuming. Now the (somewhat) happy ending to the story is that Ronnie finally got the message (literally and figuratively) and responded very apologetically, which restored a bit of my faith in Ronnie and his company. But some significant damage was done.

What this story illustrates is how detrimental a lack of coordination and oversight in customer communications can be. This situation might have been avoided if sales email outreach were templatized and triggered by a lack of response by a customer. Obviously there was a template involved (hence the exact same wording in the second and fourth Robbie emails), but the triggering mechanism failed. Moreover, even if I hadn’t been furious about the lack of recognition of my replies, I would have been turned off by the fact that the second and fourth emails were exactly the same; if you’re going to create templates, create multiple templates for different stages in the sales process and don’t repeat their use.  Email templates in the sales process should follow a logic that assumes consumption by the recipient and seek to respond to that consumption/lack of response by changing the messaging and/or offer. While there is always the potential for innocent human error, the objective of lead nurturing should be to make the entire process as automated and mistake-proof as possible to maximize the impact (and also reduce the burden on sales to compose and send the emails).

I hope Ronnie learned a lesson, but did his company — or is some other Ronnie destined to make the same mistakes that could cost the company a real prospective customer?