Tag Archives: Bank of America

Banks brand their cost-cutting programs

U.S. bank profitability in recent quarters has been driven by significant reductions in provisions for loan losses.  With these provisions now returning to normalized rates, and with revenue growth anemic, many U.S. banks are turning their attention to reducing noninterest expenses.  A number of banks now have branded cost-containment programs in place, including Project New BAC (Bank of America), Project Compass (Wells Fargo) and Keyvolution (KeyBank).

While some may see this as a cynical attempt by banks to put a gloss on an effort that ultimately result in lost jobs, from the banks’ perspectives, branding these programs serves to emphasize their commitment to cost containment with both external (investors and analysts) and internal (executives and other employees) stakeholders.

  • For investors and analysts, this commitment is seen in having a named program in place, with overall saving goals, specified areas where savings can be attained, as well as regular progress reports
  • For bank staff, the branding of such programs builds awareness, coordinates various cost-containment initiatives at the bank, as well as providing a forum for staff to submit cost-containment suggestions

Expect more banks to follow the lead of Bank of America, Wells Fargo and KeyBank.

Small business credit card issuers are ratcheting up rewards

In July, EMI posted a blog on leading small business credit card issuers making large bonus point offers to encourage small business customers to activate and continue to spend on their business cards.  Some of these leading small business card issuers are turning their attention to revamping rewards structures for their leading cards.  Yesterday, Bank of America announced the introduction of a new version of its Cash Rewards for Business MasterCard.  It has added 2% cash back on spending at restaurants, in addition to the previous rewards of 3% on purchases at office supplies, gas and computer network services, as well as 1% on other purchases.

Other issuers that have enhanced their small business rewards card programs include:

  • Capital One: launched the No Hassle Cash Premier Card, featuring 2% cash back, as well as a bonus of up to $150 (this card does come with a $59 annual fee)
  • American Express: introduced a new version of its Business Gold Rewards Card, with triple points on airfare, double points on advertising, gas and shipping, and 1 point per dollar on everything else.  It previously offered a flat 1 point per dollar reward.  The card also features a 50,000 point bonus (for spending $10,000 on the card within the first 150 days).  The annual fee for this card has risen from $125 to $175 (both American Express and Capital One are evidently betting that small businesses will be willing to pay an annual fee in exchange for these higher rewards)
  • Chase: launched new earnings structures for Chase Ink Classic and Ink Cash: 5 points per dollar/5% cash back on first $25,000 in annual spend on office supplies, telecommunication services and cable services; 2 points per dollar/2% cash back on first $25,000 in annual spend on fuel and lodging; and 1 point per dollar/1% on all other purchase

The growth of bonus offers and bonus rewards illustrates the extent to which the leading small business credit card issuers are competing to capture a share of small business card spending.  There is significant growth potential in this market, as cards still account for a small share of overall small business spending.

And there are recent signs of life in the overall small business card market, which has been in the doldrums since the start of financial crisis.  Last week, American Banker reported on FDIC data that shows big banks starting to grow loans of $100,000 of less (which are largely made up of small business cards).

Leading banks continue to grow marketing spend

One of the more interesting trends in leading U.S. banks’ second-quarter financials is the strong growth in marketing spend. Most of the leading banks significantly scaled back their marketing spend following the financial crisis towards the end of 2008. Since then, most have grown this expenditure, and the latest data shows that this trend is continuing.

The following table summarizes year-on-year changes in marketing spend in recent quarters (quarter on quarter comparisons are typically not very revealing, due to the seasonal nature of marketing spend):