Category Archives: Commercial Banking

FDIC Quarterly Report Shows Upsurge in Bank Lending

The FDIC’s quarterly banking report shows signs of strong lending growth.  As increased lending is a sign of growing economic confidence, this report is a positive indicator both for the industry, which has been struggling for revenue growth in recent quarters, as well as for the economy in general.

According to the FDIC:

  • Total loans and leases rose 1% year-over-year (y/y) and 2% quarter-over-quarter (q/q) to $7.5 billion at the end of 4Q11. The charge-off rate was 1.37% in 4Q11, down 93 bps y/y and 9 bps q/q. The charge-off rate is now at its lowest level since the second quarter of 2008, just prior to the full onset of the financial crisis.
  • Overall loan growth was driven by strong growth in commercial and industrial (C&I) lending. End-of-period C&I loans rose by 14% between 4Q10 and 4Q11, and by 5% between 3Q11 and 4Q11. The C&I net charge-off rate fell 76 bps y/y and by 5 bps q/q, to 0.78% in 4Q11.
  • Drilling down into C&I lending, small business lending (defined as C&I loans of less than $1 million) fell 3% y/y, but rose 1% q/q, reflecting other recent indicators that banks are returning to small business lending. And it is notable that growth in small business lending is most evident among the largest banks.

So following a number of years of retrenchment, how well prepared are banks to ramp up their lending activity? To position themselves to benefit from an overall resurgence in lending, individual banks need to:

  • Undertake a comprehensive assessment of their capabilities and processes, covering vital areas such as product portfolios; positioning and marketing activities, sales structure and support, as well as customer communications
  • Benchmark bank performance against competitive best practices
  • Identify operational areas that are under-performing, and
  • Implement initiatives to quickly correct these deficiencies

2012 Email Evolution Conference: Email Isn’t Dead; It’s Just Evolving

The conference kicked off its Thursday session with a substantive and thought-provoking keynote from Jessica Harley, VP of Customer Marketing at Gilt Groupe. While her presentation touched on many aspects of Gilt’s email marketing efforts, the most notable theme was that we — as marketers generally and email marketers specifically — can’t think about email marketing in a vacuum. In that email marketing vacuum, response rates appear to be declining and social seems to be gaining precedence. But outside that vacuum, email continues to play a vital role in driving engagement and conversions.

Expanding outside the vacuum enables email marketers to recognize that conversions and email’s impact may be felt in ways that aren’t captured by traditional measures. In Harley’s experience at Gilt, customers may look at emails on a mobile device but then convert indirectly on the same day via the web or via an App. In this scenario, the email is the trigger to go to those transactional channels. Therefore, we need to evaluate email performance not always on an immediate basis — how many viewers or clickers did the email drive in the first day or two — but with a longer term view. And if we think of emails as doing more than driving a single transactional response, we need to extend our measurement, for example, whether a series of emails over time produce a more engaged, higher value customer population.

In EMI’s presentation with State Street, I expanded on this theme: consider thinking of email in the context of all the other response channels. Since our objective as marketers is to drive engagement and transactions, it’s important to remember that email is but one means to that end. For certain customers at certain points in the decision-making process, email might not be as effective a means as direct mail or calling.

The Chicken or the Egg? Interpreting Social Media Data and Business Results

Two recent studies purport to prove that social media has a strong, positive impact on business results.

  • A recent study by Bain & Company uses the Net Promoter Score satisfaction/loyalty research methodology to assert that those customers who engage with companies through social media channels are more loyal (have a higher NPS) and spend more with that company as compared to those customers who don’t engage with the company through social media.
  • A second study by Constant Contact and Chadwick Martin Bailey cites data from a survey of Twitter users to argue that Twitter users who follow a company/brand on Twitter are more likely to purchase products from that company.

There is, as I see it, one big problem with this “proof” of the impact of social media channel usage: Did the chicken come first or the egg? Isn’t the most likely scenario the fact that social media engagement AND buying more/loyalty/recommendations are simply both symptomatic of a pre-existing strong connection between the user/customer and the brand? In other words, there’s no proof that social media engagement caused the increase in purchases/loyalty, only that the engagement and the increase coexist in the same population.

The good news, however, is that my note of caution regarding the interpretation of the data touted by these studies doesn’t make that data useless. In fact, a better way to interpret the data would be to conclude that those who engage with a company on social media are self-identifying themselves as that company’s high value customers. With this in mind, the social media channel can then be leveraged to ensure that these customers are rewarded for their engagement: offered special deals, encouraged to spread the word, given opportunities to provide input to product development, etc. Whereas the previous interpretation of the data suggests that it would be a good marketing strategy to try to attract more users to engage via social media, this revised interpretation would lead a company instead to invest in harvesting already engaged users to drive additional revenue.

The moral: Companies must exercise caution when using survey data to drive strategy—not because primary research shouldn’t drive strategy (it should), but because misinterpretation can have significant, often negative, consequences.