What economic, industry and demographic forces do we face?

Transcription

1 What economic, industry and demographic forces do we face? April 24, 2013 Fabio Biasella VP, Client Advisory Services A Data Driven Approach for Fact Based Decision Making 2 1

2 How Do Our Customers Work with Us? Technology Professional Services Results Research Analytics & Intelligence Goals & Objectives Strategy 3 Economic & Industry Overview CEO Workshop Report December

3 Strategic Concerns: Financial Services Industry March 2013 Short Term Concerns Long Term Concerns Economic De-Leveraging (slow loan Government Real Estate: Is Improvement Sustainable? Concerns growth) Finances Energy Independence Interest Rates and Inflation Regulatory Environment The Operating Environment Consumer Financial Protection Bureau Margin Compression Qualified Mortgages (QM) Guidelines Declining Non- Interest Income Improving Loan Quality Managing Growing Compliance Costs OD/ NSF Restrictions? Default Risk Morphing op into Interest Rate Risk Competitive Environment Deepening Member Relationships Mobile Banking / MDC New Competitors in Payments The Evolution of the Branch Big Themes for 2013 Expanding the Share of Member s Wallet is Crucial for Growth Relationship Management Is Vital to Organization Success Especially with younger households. New Sources of Non Interest Income Need to be Identified Optimize Branch Performance with Improvements in People and Technology 3

4 Household Growth and Wallet Share CEO Workshop Report December 2012 Where Are You Seeing Growth? CEO Average - All Households - December Are you driving deeper relationships? Look for higher levels of service and balance growth compared to household growth. Consider how your loan and deposit growth is influencing the loan to deposit ratio. +8.0% +7.0% +6.0% Annualized Six Month Growth +6.5% +6.5% +7.5% +5.0% +4.0% +3.0% +3.8% +3.8% +3.3% +3.3% +3.3% +4.1% +3.1% +2.0% +1.6% +1.6% +1.0% +0.0% Percentile CEO Average CEO Average High Performers Member Households Deposit and Loan Services Total Deposit Balances Total Loan Balances CEO Strategies Book Pages: 55, 57 4

5 Better Cross-Sales Are Possible 49 24% 22% 18% 16% 14% 12% 10% 8% 6% Trend in Cross Sales Ratio (Excluding CDs) Top Two Percent High Performers CEO Average 17.4% 11.4% 9.2% Top 2 Percentile: Checking Penetration: 65.2% Credit Card Penetration: 23.3% Loan Penetration: 51.4% Services per HH: 2.36 What Total Loan Potential Does Your Existing Member Base Hold? CEO Average - Retail Households - December CEO Average controls 22.0% of its members' loan wallet. The total non mortgage loan balances that members currently hold elsewhere is an estimated: Loan Share of Wallet* $811 Million or $16,771 per household 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 22.0% 22.0% 25.2% 0.0% CEO Average CEO Average High Performers Percentile 51 *First mortgages are excluded from the total loan share of wallet to prevent distortions caused by the sale of these loans. CEO Strategies Book Pages: 362 5

6 Relationship Development & Gen Y CEO Workshop Report December 2012 CEO Average: Gen Y Product Usage Trends 37 Gen Y Product Penetration 70% 65% 60% 55% 50% Checking penetration is growing with Gen Y. Loan penetration is not growing. 58.8% 58.6% 59.0% 60.9% 61.6% 62.8% 63.3% 3% 45% 40% 35% 39.7% 39.4% 38.8% 39.0% 39.2% 38.6% 40.1% 30% Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Source: CEO Strategies Average Data Percent with Loans Percent with Checking 6

7 Composition of Debt Younger consumers saddled by high (and rising) levels of student loans 40 Was 9% in 2007 Auto Other, 3% Loans, 6% HHs Younger than 35 Credit Card, 2% Other, 4% Auto Loans, 4% Student Debt, 3% HHs 35 and Older Credit Card, 3% Student Debt, 15% Residential Property, 74% Residential Property, 86% Source: PEW Research Center tabulations of Survey Consumer Finances Data How Well Are You Engaging Gen Y Households? CEO Average - Retail Households - December Product Penetration % of Gen Y HHs Penetration Percentile Average Balance Balance Percentile Total Profit Checking 63% 63% 50 $1, $76,788 Auto 18% 18% 51 $11, $527,663 Credit Card 51 $1, $238,262 0% 40% 60% 80% CEO Average CEO Average This page highlights your Gen Y households' usage of key products as well as the total share of wallet for Gen Y households. 25.0% 20.0% 15.0% 10.0% Gen Y Total Share of Wallet Comparisons 17.8% 17.8% 21.8% Are you establishing deep relationships with this segment? 5.0% 0.0% CEO Average CEO Average High Performers Percentile 50 CEO Strategies Book Pages: 352, 365 7

8 Diversifying Non Interest Income CEO Workshop Report December 2012 Improvement In Industry Earnings Due to Mortgage Refinance and Provision Release 96 $35 $30 $ Billions $25 $20 $15 Operating Expense Net Interest Income $10 Non Interest Income $5 $ Provision Expense * Source: NCUA Quarterly Data *2012 data is six months annualized 8

9 How Much Non-Interest Income Does Each Product Line Drive? CEO Average - All Households - December Notice how much non interest income is generated by the checking relationship. Higher penetration will contribute to increased non interest income for each respective product area. Checking Other Deposits Credit Cards First Mortgages Other Loans Percentile $124 $22 $17 CEO Average $3 $25 $124 $22 $17 CEO Average $3 $25 $138 $28 $18 High Performers $3 $60 $0 $50 $100 $150 $200 $250 $300 CEO Strategies Book Pages: 110 Do Your Members Know You Offer Investment Services? CEO Average - December ,000 3,500 3,000 2,500 2,000 Number of Housholds Using Service 1,839 3,561 In aggregate, households hold 50% of their assets in deposits and 50% in non retirement investments. How much more potential is there for your members to need and utilize investment services? Total Dollars CEO Average $95,720,140 (11%) 1,500 1, HH Penetration Percentile Investments 2.8% 51 CDs 6.5% 50 $760,584,936 (89%) Total Assets Under Mgmt 11% Total Deposits Service Profit Percentile $ ($145) 52 CEO Average 89% CEO Strategies Book Pages: 116, 257 9

10 The Impact of Technology on the Member and our Branches CEO Workshop Report and RFG National Research December 2012 Impact of Technology on the Member 123 Key Trend in Technology is Channel Proliferation Few Channels are Ever Retired Impact: Escalating Delivery Costs Mobile Emerging as Key Channel Large banks seek to differentiate on mobile services Small community financials continue to play catch up, are reliant on vendors Mobile banking will grow more quickly than did online banking Payments Are Rapidly Evolving Non traditional players (PayPal, Google Wallet, Square) making significant inroads At risk: traditional payment income streams such as debit and credit card interchange RFG research over many years has identified the technological changes that are impacting financial service providers. The most important trend to understand is that of channel proliferation. i That is, when new delivery channels are added, old channels are rarely retired. To wit, most consumers continue to use traditional channels such as lobby and driveup services, while rapidly embracing new delivery alternatives such as online banking, mobile banking, mobile deposit capture, etc. The result of this proliferation is escalating operating costs. 10

11 Big Banks Dominating Mobile Banking % The top five banks and credit unions have the highest percentage of primary customers that have either a smartphone or a tablet. 60% 63% 61% 50% 53% 56% 40% 30% Mobile banking as a percentage of eligible primary customers ranges from 55% at the top five banks to 36% at regional banks. 41% 35% 24% 18% 25% 10% Primary Financial Institution Penetration of Eligible 43% 55% 36% 43% 41% 0% Total Top Five Bank Regional Bank Community Bank Credit Union Have Smartphone or Tablet Bank via Smartphone or Tablet Source: RFG National Consumer Research, Fall % Usage of Mobile Phone and P to P P to P payments more utilized by younger, high income individuals Source: RFG Survey of 1000 Smartphone Users 50% 48% Almost 50% FUND their Pay Pal Account via checking ACH 40% 37% 37% Transfers 34% 30% 29% 23% 22% 22% 10% 0% P to P via any provider P to P via PayPal Used smartphone for instore purchases 9% 5% 3% Used PayPal for instore purchases Total Credit Driven Upscale 11

12 Optimize Branch Performance with Improvements in People and Technology 148 Branch evolving into sales andservice hub and away from transaction hub but remains essential as a channel Consistent experience across all delivery platforms becoming increasingly important Competency of staff magnified in importance: high tech means high touch Thank You Fabio Biasella VP Strategic Advisory services Raddon Financial Group 701 East 22 nd Street, Suite 400 Lombard, IL Office: ext 6511 fbiasella@raddon.com Need ideas, recommendations or solutions to improve marketing results? Contact RFG for our unique blend of industry expertise, strategic analyses, objective intelligence and MCIF solutions