competitive improvement starts with industry knowledge
By Robert E. Grasing
President
Industry knowledge is only of
value if it relates to how you compete from a marketing standpoint—or how you
are positioned to compete operationally. It is on the latter point that many
bankers are unprepared. The knowledge
needed for positioning includes both operational and management insights.
To illustrate this point, ask yourself the following questions:
 | If your bank is a
community bank between $1 billion and $5 billion in assets, why do top
performing banks (based on the efficiency ratio by line of business) handle
1,267 loans per commercial loan operation employee vs. an average of 765 for
banks that size? What is the differentiating performance factor that provides
this leverage? |
| Why do top-tier banks have an efficiency
ratio in the branch system of 27 percent vs. the average of 47.5 percent? |
| Why do the top
banks churn fewer deposit accounts with new accounts representing 16 percent of
the total portfolio vs. 20 percent for average banks? |
| In deposit
operations, why do top performing banks handle 62,130 transactions monthly per
employee vs. 38,940 in the average bank? How much of the solution is technology-, management-,
organization- or process-related? |
| In direct
consumer lending, why is the cost per loan $76 for benchmark banks vs. $144 for average banks? Why is the revenue
per loan $847 vs. $531 for average banks? |
| Why in top
performing banks does the total administrative expense, including information
systems, represent 14.8 percent of revenue compared to the average banks at
20.5 percent? |
| On all of these
key measures, how do banks from $5 billion to $70 billion in assets perform,
and what is the key factor in their competitive advantage, technology or deployment? |
Improving bank
performance is more than simply addressing fee income, productivity, performance-enhancing
technology and process efficiency on a bank-wide basis. Directing real improvement requires
having critical data that shows what is out of line, where to direct improvement
and how much income and expense potential exists if the resulting gains are
equivalent to top performing banks.
Banks that participate in our annual Efficiency Ratio Benchmarking
Study gain industry insights regarding the key areas in which their banks need
to improve to be more competitive. Nearly 1,100 ratios are prepared to help
banks understand operational benchmarks and areas for directional improvement.
The seven insights and comparisons we referred to represent
just a small slice of the competitive knowledge gained by participants. The
richness of these insights has become a management requirement for those banks
that either target improvements to create their own competitive advantages or
seek to reduce the operational leverage that their competitors currently enjoy.
Competitive improvement starts with relevant industry knowledge. We encourage
you to gain the level of insight that our clients and other banks, thrifts and
credit unions attain through participating in our annual Efficiency Ratio Benchmarking
Study.
For information about how to participate in the study, visit
www.bankbenchmarks.com or call us at toll-free
(877) 736-6526.§
