Tuesday Topic: Interest Rates, Community Banks, and…Meditation?

Barb,

Thanks for sharing these sources.

Here is an industry article that concludes that our current situation "lacks precedent, defies prediction and demands proactivity"  https://www.bai.org/banking-strategies/article-detail/from-deposit-competition-to-determined-direction

With many new and improved strategies available to bankers today such as the tools Promontory offers, it is interesting to see how many are still using the over-used "crutches" of:

• Running random rate-focused CD promotional specials
• Using greatly differentiated pricing for high-balance tiers
• Offering "Teaser Rate" promotions independent of post-teaser retention strategies
• Using "New-Money-Only" promotions

As profitability is derived from a combination of volume and spread, it will be interesting to watch the industry adopt better approaches to win and retain more volume without compromising price as we have so often observed from bankers to-date.  Organizations position themselves to win and retain properly-priced long-term retail deposits when they have:

• Evolved their products; (Anyone not using debit-only savings is behind the curve)
• Refined their processes; (A sequential sales process must replace the rate sheet and an order-taking posture at the front line)
• Hired curious, competent, and confident financial professionals; (The transaction-focused teller profile doesn't cut it)
• Consistently calibrated pricing; (Fresh pricing means relevant pricing)
• Prepared the on-stage and back-stage environments of the bank; (If things aren't in harmony depositors will go where things are)
• Delivered the message of opportunity to the right audience at the right time in the right format. (This takes intentional effort)

I hope everyone gets a little out of this given where we are with the Fed today.

Neil

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Neil Stanley
President of Community Banking
TS Banking Group
Treynor, Iowa
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Original Message:
Sent: 12-18-2018 08:59
From: Barb Rehm
Subject: Tuesday Topic: Interest Rates, Community Banks, and…Meditation?

A chart in today's Wall Street Journal shows net interest margins shrunk at small-cap banks in the third quarter while expanding at mid- and large-cap banks. "Rising interest rates were supposed to help banks. They are hurting many of them instead," the story begins. About midway through the piece, another choice nugget: "It is the latest sign of a growing divide between large and small financial institutions." And the divide will widen before it narrows with the Fed expected to raise rates a quarter point to 2.5% on Wednesday, the fourth hike this year. Still, experts are predicting the central bank may slow the rate of increases in 2019. (For an even deeper dive on the future of interest rates check out this piece in Bloomberg.) Finally, today's Tuesday Topic headline mentions meditation. Why? Because the Journal has a cool piece today on two apps fiercely competing to bring meditation to the masses. If the holidays-or rising interest rates-are stressing you out, check out Headspace or Calm.

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Barb Rehm
Senior Managing Director
Promontory Interfinancial Network
Arlington VA
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