The banking industry is changing rapidly, and maintaining the status quo is not a safe strategy for any bank.
New approaches are necessary to maintain or improve performance, but improving banking profitability is about more than just offering a new loan rate or updated banking app. It requires rethinking processes and adopting an entirely new mindset. A holistic transformation could be the necessary strategy for success. By focusing on five important areas, banks can meet the challenges of the evolving landscape.
Crowe has studied the business models and practices of high-performing banks that improve performance.
Read our quarterly report or reach out for a 90-day assessment.
1. Modernization
Streamlined, parallel, and automated processes can help organizations push past stymied success. Banks can move away from manual efforts, hand-keying, and multiple handoffs by:
- Automating many applications, reviews, and decisions
- Centralizing and connecting your disparate systems
- Enabling workers to be mobile
- Empowering customers to initiate actions themselves through self-serve options
Modernization - Empower customers to initiate actions themselves
Risk reevaluation - Understand the changing nature of risk
2. Risk reevaluation
All risk can’t be eliminated, but organizations can control how tightly they manage it. Protections taken to the highest degree could have diminishing returns and result in lost opportunities. After all, risk is not static, and it evolves over time. That means your organization’s tolerance limits need to be able to respond.
Innovation, experimentation, and repositioning can move the needle on risk, but your bank’s thresholds should accommodate necessary organizational growth.
Data and reporting - Find a niche area of specialization
3. Data and reporting
Acting on assumptions doesn’t lead to consistent success, and branch traffic can’t tell the whole story of what’s going on with with a bank. Enterprisewide data collection, management, analytics, and reporting have become essential, and they can offer important insights when setting a course for individual and organizational success.
- Customer behavior. Banks have to understand where, when, and how customers are interacting with their services and what customers are doing with their accounts. Banks should capture, organize, and centralize data to present a daily dashboard to all key front-office and line-of-business personnel.
- Customer profitability. Discipline in loan and other product pricing is critical to enterprise profitability. Up-to-date data on revenues and costs associated with products, accounts, and customer-level activity can help banks decide when to hold fast on things such as loan rates or fees and when to be flexible.
- Customer incentives. Better analytics can support incentives that contribute to improved performance, such as when, where, and how to use teaser pricing or relationship pricing to help avoid incentives that drive only individual success.
- Business line strategy. Capturing and reporting data on operations within each line-of-business is not a new concept, but it should go beyond the basics of loan volume and profit center reporting. Through-put data, staff efficiency and cycle-times, direct cost per activity, and contribution margin by product and structured relationships can yield clearer insights into your bank’s operations.
Channel optimization - Realign your strengths
4. Channel optimization
Digital banking and the unbundling of services are taking on larger roles, but they aren’t the death knell of traditional banking. Brick-and-mortar locations still play an important part in your bank’s success if their strengths can align with market needs.
Branches aren’t just stores waiting for customers to walk in. In fact, they can be effective, decentralized outposts of your organization in the community or key market areas. One large, central building that houses a whole lending team might not make as much sense as a strategic network of smaller locations from which personnel can operate to form key relationships, foster in-market visibility, and establish good relationships in the neighborhood.
Human capital - Use technology and data to think critically
5. Human capital
The next generation of bankers doesn’t want to push paper around. Instead, they want to use technology and data to think critically and perform effectively. And attracting and retaining these next-generation bankers means your bank needs to be ready to support them.
Attracting and retaining innovative, engaged people who will continue to add value to your organization and move up in the succession line can help your organization stay on track toward cost-effective growth and banking profitability in the long term. Strengthening your organization’s human capital might mean changing how work gets done, adjusting where investments are made and how they’re managed, and empowering the workforce.
Crowe specialists can help identify avenues to improved bank profitability
These five focus areas can help position your bank for better execution and improved and sustained profitability, but changes that have to be made won’t happen in a vacuum. When your organization shifts its entire mindset to take fresh perspectives on risk, business models, and decision-making practices, it can transform the bank for the better.
Crowe knows high-performing banks. We’ve got the knowledge and experience to help you position the interconnected pieces of your organization toward greater banking profitability. Read our quarterly report to understand what signs convey high performance, or reach out for a 90-day assessment to find out where you can improve.
Let us help you unlock your bank’s potential.
Crowe understands the practices of high-performing banks. We can help improve your organization’s banking profitability.
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Washington state clarifies that the B&O tax deduction for investment income is limited to activities that are considered incidental.
Taxpayers waiting for employee retention credit refunds face continued delays and uncertainty regarding the status of their claim.
Read about CFPB open banking rule, FASB ASU 2024-03, SEC commissioner thoughts on regulatory environment, CAQ fall audit partner survey results.