Consultant offers ideas for improving bottom line

Northwestern Financial Review, Nov 15-Nov 30, 2003 by Bengtson, Tom

Ken Proctor, a Florida-based consultant with Brintech, Inc., presented "seven prescriptions for improving the health of your bank's bottom line," at the 23rd annual seminar hosted by the Wolf Etter and Company accounting firm in North Mankato, Minn., on Oct. 22.

The banking industry is enjoying some of the best profits in history, but Proctor noted that last year's record performance was boosted by one-time gains on the sale of assets. Proctor also said banks traditionally have relied heavily on commercial real estate for lending, yet vacancy rates are rising in many areas. With net interest margins squeezed and loan demand flattening, Proctor encouraged bankers to take pro-active steps to maintain profitability levels.

Proctor offered the following ideas:

Focus on growth, both internal and external. Use a customer information file to help identify opportunities. Assess the satisfaction of your customers using focus groups and mystery shoppers.

Focus on delivery channels. In 1997, there were 39,900 bank branches in the country, Proctor said. "Today there are 48,000. The branch is alive and well." he encouraged bankers to emphasize the branch office, staffing it with well-trained people. he also said banks should observe the customer traffic patterns in the office and design the interior so the customer has the opportunity to interact with as many bank employees as possible. He said offices should establish weekly sales goals, with employees paid on commission. he encouraged bankers to call customers prior to the maturation of their certificates of deposit to assure retention of those funds.

Maximize the efficiency of technology. "The high performing banks tend to spend more on technology than others," Proctor said. "Most of that expense is in training." Although Internet banking is gaining momentum, Proctor warned banks against relying too heavily on web banking. "Eighty-five percent of Internet banking customers still come into the bank once a month," he noted.

Manage the net interest margin more aggressively. he advised bankers to price loans in one-eighth increments. "You don't have to give up 25 basis points, in many cases," he said. "Offer 12.5. Many times, that will suffice."

He warned against paying too much for deposits. "Make sure you are not paying more than the cost of getting funds from the Federal Home Loan Bank," he said.

Focus on fees. he emphasized the importance of collecting the fees that the bank charges. he said many banks waive far too many fees. "The high performing banks collect 95 percent of the fees they charge," he said.

Manage costs. "This is a matter of aligning people, processes and technology," Proctor said. "For example, have your tellers open new accounts when they have down time."

Manage risk. "You need to have a risk management program in place for compliance and all risk areas of the bank," Proctor said.

By Tom Bengtson