Friday, February 05, 2010

My Banking Lessons Learned this Recession

I attended a meeting the other day with a board committee of a client that is profitable and pro-active in charting their future. While others were talking, I jotted down what I thought were key lessons learned this recession for bankers. Here is what I came up with:

1. Never forget about economic cycles. When deciding on putting bonds in your portfolio or loans on your books, can the borrower survive a recession?

2. Most lenders are salespeople. They sell your bank to the customer, which is good. They also sell their loans to loan committees. Bad lenders travel like nomads to other banks once their loans go sour at yours.

3. Loans should be priced for credit and duration risk, and covenants should penalize borrowers for not providing financial statements on a timely basis. Lenders may manage 100 relationships. The least they could do is maintain up-to-date underwriting and loan files on those customers.

4. Customer loyalty is cemented in bad times. If you help a customer through tough times, they will remember it for a very, very long time. And will probably tell others.

5. Business customers want you to make it easy for them to bank with you. Constantly look at ways to improve your convenience for them. Their time is very valuable. This level of attention to detail will make it very difficult for your customers to leave you.

6. Safety and soundness exams are becoming somewhat politicized. Examiner actions may not make good business sense.

After delivering my thoughts to the Board committee, they asked if I was going to blog about them. Well, yeah!

You may agree with some, and disagree with others. Let us know your thoughts.


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