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Recovery 5 the S Version
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Recovery5 the S Version

The latest version of recovery in our economy has stable legs with far less fanfare than a new mobile phone and far more challenges for banks.  It is going on five years since the collapse of the market.  In 2010, we found the banking and credit union area unemployment rate at its highest level of approximately 8%*with over 500,000 bankers laid off.  Our business demand from banks and credit unions for talent flowed around mortgage, workout, credit, and loan review.  Commercial lenders were literally applying on line and in person on a monthly basis to our clients. 

What’s the S Version?  It’s “the squeeze” that banks find themselves in today.

First, the Federal Reserve in their April 2012 Survey said:  “Almost all domestic banks that reported having eased standards or terms on C&I loans cited more-aggressive competition from other banks and nonbank lenders as a reason for having done so, with fewer than half of the banks that reported having eased standards attributing the change to an improved or less uncertain economic outlook.**”  In addition, in recent months we have seen commercial real estate begin to heat up again as noted in the same surveys by “modest net fraction reported easing their standards on CRE loans”**.  We are being told of interest rate battles for C&I loans on a consistent basis at levels near bank’s cost of funds and operating expenses  The competition for C&I loans is at higher levels prior to the collapse due to less ability/desire to lend in the commercial real estate sector. 

Second, during 2009 and 2010 we saw commercial lenders and mortgage lenders aggressively seeking employment at banks.  This was due to either having been laid off by their bank or deep concern about their bank’s financial condition.  The exact opposite is true today with many of the weaker banks having been sold, merged, or raised capitol.  Lenders of all types are reticent to move at this point as their desire for stability and security in their job is much higher than it was before the collapse. 

Third, the biggest bright spot for banks is the mortgage area and with the additional easing move of 9/13/12 guaranteeing the refi boom will last through the remainder of 2012.  However, the ability to hire mortgage lenders is greatly restricted by that very success.  Most banks are reporting mortgage loan pipelines of 75-110 days.  This means the average mortgage lender has 20-25% of their annual income in that pipeline.  This means that to hire a mortgage lender away a bank would need to buy out a pipeline that they cannot recover the cost of in a reasonable time frame. 

Fourth, the cost of compliance is at its highest level ever.  It’s simple, if we pass more regulations the cost to adhere to those go up.

Fifth, technology is changing at an incredible pace and consumers and business are demanding banks have these new abilities.  No sooner did we address e-banking desires and mobile banking came along. 

Our clients are regional and community sized banks and credit unions in Indiana, Illinois, Kentucky, Ohio, & St. Louis.  The competitive pressures on interest rates are meeting up with the upward pressures of technology and compliance demands to create a squeeze.  Our client banks (regional & community banks) used to be able to go the national banks and attract away their small business lenders as their commercial lenders.  Due to the automation of the commercial credit process at national banks for small business lending fewer qualified candidates exist there.  If Kelly King at BB&T is right when he says “organic growth will give the most value for investors”*** then your bank needs not just a talent acquisition strategy but a talent acquisition partner. 

Many firms are using technology in such a way that they are becoming more transactional with their client banks and credit unions.  We are going in the opposite direction.  We want to form long term relationships with a few regional and community banks and credit unions.  We will embrace technology as you can see by our introduction of video interviewing abilities and aids introduced this coming month.  If you are targeting organic growth what is your talent acquisition strategy to meet that growth?  Do you have a partner firm you hired or are hiring to get what you need?  If you do are they committed to partnering or just doing a transaction? 

 

*Reference Bureau of Labor Statistics, US Dept. Labor Database

**FRB Survey April 2012

***Yahoo Finance 9/11/12 quoting him from the Barclay’s Capitol Global Financial Services Conference