Tag Archives: targeting

Bank’s vertical industry focus bears fruit

Over the past three years, the commercial sector has been the primary focus for bank loan growth efforts. In 2010 and 2011, strong commercial loan growth rates were generated as the economy recovered from the 2008-2009 financial crisis and subsequent recession. The commercial lending market started to get more competitive (as evident in declining yields), so many banks have turned to vertical industries to maintain and even accelerate commercial loan growth rates.

The following table summarizes vertical industry performance for some of the leading U.S. banks:

The following are 10 quick steps for banks to market effectively to specific vertical industries:

  1. Size the opportunity (industry size and growth rate)
  2. Profile the industry, covering growth prospects, key opportunities and threats, financial usage and needs, as well as the typical financial decision-making process
  3. Identify high-potential sub-sectors (with strong growth potential and unmet financial services needs)
  4. Identify industry clusters in particular geographies within in the bank’s footprint
  5. Analyze competitor industry-targeting initiatives
  6. Assess the bank’s current ability to meet customer’s financial needs; develop and implement strategies to fill product/service gaps in-house or via partnerships
  7. Develop a marketing plan around industry-specific media, such as trade publications, associations, events, and social media channels
  8. Deploy dedicated industry banking teams
  9. Create customized collateral and sales tools to support these teams
  10. Publish industry-specific content (videos, webinars, case studies, articles, newsletters, reports)

Banks Targeting Verticals to Drive Commercial Loan Growth

In recent quarters, most U.S. banks have been reported double-digit commercial loan growth, and most bank executives claim that commercial lending will continue to be a key driver of overall loan growth in the coming quarters. With so many banks targeting commercial loan growth, competition has increased, which is leading to declines in commercial loan yields.

To differentiate from their competitors and capture strong commercial loan growth opportunities, banks are increasingly targeting specific industry sectors. Presentations by leading regional banks at this month’s Barclays Global Financial Services Conference highlighted this trend:

  • Comerica is enjoying very strong growth in targeting two industry sectors: energy (loans up 68% y/y in 2Q12) and technology and life sciences (+36%).
  • Fifth Third’s deployment of a national healthcare team has led to a 40% y/y rise in outstandings. Specialized products include the RevLink solutions platform, which supports healthcare organizations in streamlining collections and managing costs, as well as improving liquidity and working capital. Over the past year, RevLink accounts have risen 30%.
  • Regions has five specialized lending groups headquartered in different cities throughout its footprint: energy in Houston, healthcare in Nashville, technology/defense in Charlotte, and both transportation and restaurant in Atlanta.
  • Like Regions, Associated Bank has an energy (oil and gas) group based in Houston.

Banks looking to pursue a vertical marketing approach need to develop a comprehensive understanding these industries in order to identify which industries to target, and how to do so. The following are some key questions that banks need to answer in this regard:

  • How many firms from specific industries are in the bank’s footprint?
  • What is the projected industry growth rate?
  • Are firms clustered in specific geographies?
  • What are current and projected levels of profitability?
  • Do these firms have unique financial needs?
  • What is the current level of competitive intensity? Do other banks have dedicated resources to target this vertical?
  • What is the customer decision-making process?
  • Does the bank have sufficient in-house expertise to effectively target and serve this vertical?

Banks focusing attention on the mass affluent market

Recent news and presentations from leading banks show a widespread desire to grow the mass affluent segments. Some examples:

  • At its recent Investor Day, Bank of America highlighted mass affluent as a key customer segment as it aims to achieve its objective of leveraging the franchise–driving closer relationships between different business units in order to grow share of customer wallet.  Earlier this year, the bank launched Merrill Edge, a new integrated banking and investment platform, for mass affluent clients.
  • Citi reorganized its U.S. credit card and retail banking units, with each unit creating segments dedicated to affluent customers.  It also recently launched a range of premium cards (ThankYou Preferred, ThankYou Premium and ThankYou Prestige) for affluent cardholders.
  • At a recent Citigroup Financial Services Conference, SunTrust highlighted mass affluent as a targeted growth area.
  • This month, Capital One introduced the “Match My Miles Challenge” promotion to attract new customers to its high-end Venture Card.
  • Chase radically simplified its credit card product portfolio, with cards now dedicated to specific customer segments, including the Freedom card, which is targeted at the mass affluent segment.

To reach and serve this segment, banks first need to conduct comprehensive research into the characteristics, financial needs and behaviors of mass affluents, as well as into the competitive environment.  Insights from this research feed into: new products and services; advertising and branch merchandising; pricing decisions; level of online and offline service provision; as well as training and ongoing support for branch and call center personnel.  It is also imperative that the bank’s organizational structure, processes and systems to support, rather than inhibit, targeting efforts.