Tag Archives: JPMorgan Chase

Brighter outlook for small business lending

In recent quarters, there has been significant growth in U.S. commercial lending, with many leading banks predicting that this strong recovery will continue in 2012. And now the small business lending market, which has been in the doldrums since the onset of the financial crisis in 2008, is starting to show some signs of life.

JPMorgan Chase reported today that it grew EOP business banking loans for the fifth consecutive quarter in 4Q11.  Business banking loan originations increased 24% in 2011 (although the stop-start nature of the recovery is seen in the fact that business banking originations were down 4% y/y in 4Q11).

Other positive signs in the small business loan market:

  • The most recent issue of the Federal Reserve’s Beige Book highlighted a pickup in business loan demand (some leading banks have claimed that weak demand, rather than more restricted access to credit, has been the main impediment to small business loan growth).
  • There are signs of improvement in the broader economy (notably a decline in unemployment rate) , and these macroeconomic factors tend to have a strong impact on consumer and small business optimism.
  • And small business optimism is indeed recovering. The National Federal of Independent Business’s Index of Small Business Optimism rose 1.8 points to 93.8 in December, which is still below the key 100-point threshold, but up from a low of 81 in March 2009. Signs of an improved outlook can also be seen a recent TD Bank small business survey.

So, banks have significant opportunities to build their small business franchises.  However, many banks need to recognize that they have suffered reputational damage in recent years, and should focus on developing an integrated sales and marketing strategy to re-position themselves as a trusted provider of financial products, services and advice to U.S. small businesses.

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