It took less than three months for a deal to be reached between Columbia Banking System and the smaller Bank of Commerce Holdings.Banks are on pace this year to merge at a level not seen since the 2008 financial crisis. It is a sharp turnaround from last year, when the economy spiraled and many regional and community banks put merger plans on the shelf. Now, bank executives are feeling more certain about what the future holds, but some are finding it hard to make it on their own. Though the economy has in many ways recovered from 2020, loan demand is still low and profits from lending are slim.
Banks have announced more than $54 billion in deals through late September, according to Dealogic. That puts industry mergers and acquisitions on pace for their biggest year since 2008, when some big banks had to sell themselves to stave off collapse. At this time last year, banks had announced just $17 billion in mergers.
Banks typically spend weeks or months turning a potential target’s loan book upside down, searching for risky loans or other red flags, before agreeing to acquire it. But the Covid-19 pandemic muddied that process. For months, lenders struggled to assess the creditworthiness of their own customers, much less those of their competitors.
“Neither potential sellers nor buyers really wanted to do a transaction last year because of the uncertainty that could be on folks’ balance sheets,” said Kevin Riley, chief executive of First Interstate BancSystem Inc. FIBK -0.17% in Billings, Mont.
But the expected wave of loan defaults never materialized, and by the end of last year, serious merger conversations resumed, according to executives and regulatory filings. This month, First Interstate FIBK -0.17% agreed to buy regional lender Great Western Bancorp Inc. in a deal that will boost its assets to more than $32 billion.
“[Banks] are no longer fearful of the bottom falling out,” said Nathan Stovall, an analyst at S&P Global Market Intelligence. “They are no longer looking at a deal like trying to catch a falling knife.”2019 was also a big year for bank mergers, but more of the major regionals are in play this year. So while there are fewer deals this year than at this point in 2019, the overall value is higher than it was two years ago.
The Federal Reserve cut interest rates to near zero when the pandemic hit, and low rates have made it more difficult for banks to profit from their bread-and-butter business of lending. The average net interest margin, a measure of lending profitability, reached a record low of 2.5% in the second quarter, according to the Federal Deposit Insurance Corp.
Sacramento, Calif.-based Bank of Commerce Holdings began courting potential merger partners in the spring of 2021. The board and management of the $1.9-billion-assets bank had for years considered different options to overcome ever-narrowing industry margins, including being acquired by a larger bank, CEO Randy Eslick said. It took less than three months to iron out a deal with $18 billion Columbia Banking System Inc. of Tacoma, Wash.
The deal was announced in June, and the combined bank will have the resources to invest in technology and other areas—trust departments, wealth management, specialty lending—that the smaller Bank of Commerce wouldn’t have been able to fund on its own.
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“Those types of things bring technology to the table that we could not afford to,” Mr. Eslick said. “At the end of the day, we have more arrows in our quiver.”
The pressure to scale up has only grown more intense in recent years, said Scott Wylie, CEO of the $2 billion First Western Financial Inc. in Denver. In July, First Western said it would buy the parent company of a smaller bank, the nearby Rocky Mountain Bank.
“For a $300- or $500- or $700-million bank, it used to be you could have a nice little business that could go for a long time,” Mr. Wylie said. “These days, that’s really hard.” Conway, Ark.-based Home BancShares Inc. said this month it would buy Happy Bancshares for more than $900 million. Within weeks, CEO John Allison got pitched another deal.
“Someone said to me, ‘Johnny, the body hasn’t even gotten cold yet…and they’re bringing all these other deals,’” Mr. Allison said.
Maddigan, Ruth; Zaima, Janis (1985). “The Profitability of Vertical Integration”. Managerial and Decision Economics. 6 (3): 178–179. doi:10.1002/mde.4090060310.
Ng, Artie W.; Chatzkel, Jay; Lau, K.F.; Macbeth, Douglas (2012-07-20). “Dynamics of Chinese emerging multinationals in cross‐border mergers and acquisitions”. Journal of Intellectual Capital. 13 (3): 416–438. doi:10.1108/14691931211248963. ISSN1469-1930.
Banks and financial services providers can realize the efficiency and cost savings of cloud-based payments by taking proactive steps to guard against these common mistakes, notes Rustin Carpenter, a Global Payments Solution Leader for Cognizant’s Banking & Financial Services Industry Services Group.
The cloud’s lure of simplification is a powerful incentive for payment providers, as its role enabling modernization and permanently switching off legacy applications. Where banks struggle, however, is in shaping a strategy to get their payment services to the cloud. By understanding the common missteps, banks can create a plan for payment migration that maximizes benefits while minimizing risks.
The pandemic was a digital tipping point for banks, forcing them to implement in just a few months capabilities that otherwise would have taken several years. Research published in 2019 found that financial services firms lagged in adoption of public cloud infrastructure as a service (IaaS), with just 18% broadly implementing IaaS for production applications, compared to 25% of businesses overall.
Now many banking leaders we talk with are taking a serious look at cloud-based payment services, motivated by the age and complexity of their core payment applications as well as their business’s growing confidence in the security of cloud platforms such as Google Cloud, Microsoft Azure and Amazon Web Services (AWS). As banks contemplate migrating payment services to the cloud, here are some common mistakes to avoid that will ensure a smoother journey:
1. Assuming the cloud is cheaper.
Cloud-based services are indeed less expensive to run — once applications and services have been migrated. To manage a successful payments migration, be aware of the costs along the journey. The cloud can be a heavy lift. While banks and financial services providers often consider themselves proficient at consolidation and rationalization, the extensiveness required for cloud migration frequently far exceeds the effort of previous initiatives. For example, we helped a bank reduce its infrastructure footprint by 25% and lower its total cost of ownership by migrating its applications to the cloud.
That outcome, however, required careful analysis of the bank’s application source code and development of a migration strategy and cloud deployment architecture, as well as assessing and migrating more than 800 applications over three years. Cloud-based services are more streamlined and less expensive to operate, but accurately budgeting for the upfront time and resources of a cloud payment migration is challenging due to the many unknowns. Careful attention to planning is critical for a realistic cost assessment.
2. Underestimating the amount of prework.
The cloud promises to reduce complexity but getting to that point takes a thoughtful migration plan that’s complete and doesn’t skimp on details. What steps will be taken to ensure there’s no disruption to clients? Which applications make sense to retain and manage in-house, and which can be leveraged as payments as a service? For instance, fund disbursements for a retail consumer bank that administers 529 plans are typically a low-volume service for which cloud automation is a great fit, replacing paper checks with significantly less costly cloud-based payments.
But when it comes to payments as a service, managing risk and ensuring value also come into play. Wire transfers might appear to be good candidates for migration to cloud payments, but if most of the bank’s transfers are for high net worth individuals with equally high customer lifetime value, then the transfers may require levels of personalized service best handled with an on-premise platform rather than in the cloud. A well thought out strategy that addresses all impacts and value opportunities helps bank leaders avoid the unintended consequences that keep them awake at night.
3. Failure to prioritize.
A payments migration needs to be phased in a way that provides strategic competitive advantage. Setting priorities is key. For example, a bank may choose to align its payments migration with a specific strategy, such as a planned de-emphasis on branch offices. Another approach is to migrate the costliest payment applications first. Some banks may reserve cloud adoption for when they’re ready to add new payments capabilities.
Each bank’s path to cloud payments is nuanced, yet there’s often a feeling among banking leaders that moving to the cloud is an all-or-nothing proposition. That is, payments are either entirely cloud-based or all on premise. A more realistic goal is to craft a migration roadmap for a hybrid environment that accommodates both types of infrastructure for the near future, and to then prioritize and phase the payments migration in a way that makes strategic sense.
4. Testing in a dissimilar environment.
Replicating legacy operating environments for testing is expensive, so it’s not uncommon for banks to settle on environments that are similar but not identical — though the variation often leads to production environment errors that can derail cloud migration efforts. Performance falls short of expectations, typically due to the tangle of payment applications resulting from years of mergers and acquisitions.
For example, post-merger banking platforms often utilize more than one legacy payment hub, and there’s little chance that a bank’s current IT staff fully understands or can predict the unintended consequences for the hubs when making changes to the platform. Don’t fret over creating the perfect testing environment. Rather, build an environment that’s as close as possible.
By avoiding these common missteps, payment providers can reap the benefits of a simplified, modern infrastructure and application environment and minimize the risks.
Rustin “Rusty” Carpenter leads payments solutions within Cognizant’s Banking & Financial Services’ Commercial Industry Solutions Group (ISG). In this role, he works with group leaders and client-facing teams to elevate Cognizant’s client relevance, industry expertise and challenge-solving capabilities. Over his career, he has developed deep and broad expertise in payments and the emerging alternative and digital/mobile payments arenas. He is a frequent speaker on these topics at conferences worldwide and serves as a board advisor to fin-techs in all areas of payments and fraud prevention/mitigation.
Carpenter most recently was Head of Sales & Service, NA for ABCorp. Previously, he ran the Instant Issuance business for North America at Entrust Datacard; served as COO for Certegy Check Services, N.A.; was General Manager, NA for American Express Corporate Services; and completed multiple assignments at Andersen Worldwide and Dun & Bradstreet. Rustin has a Bachelor of Arts degree from Denison University and an MBA in finance from Rutgers Graduate School of Management. He can be reached at Rustin.Carpenter@cognizant.com
AT&T (1993). “What Is The Cloud?”. Retrieved 2017-10-26. You can think of our electronic meeting place as the Cloud. PersonaLink was built from the ground up to give handheld communicators and other devices easy access to a variety of services. […] Telescript is the revolutionary software technology that makes intelligent assistance possible. Invented by General Magic, AT&T is the first company to harness Telescript, and bring its benefits to people everywhere. […] Very shortly, anyone with a computer, a personal communicator, or television will be able to use intelligent assistance in the Cloud. And our new meeting place is open, so that anyone, whether individual, entrepreneur, or a multinational company, will be able to offer information, goods, and services.
Levy, Steven (2014-05-23). “Tech Time Warp of the Week: Watch AT&T Invent Cloud Computing in 1994”. Wired. AT&T and the film’s director, David Hoffman, pulled out the cloud metaphor–something that had long been used among networking and telecom types. […]
“You can think of our electronic meeting place as the cloud,” says the film’s narrator, […]
David Hoffman, the man who directed the film and shaped all that cloud imagery, was a General Magic employee.
Rochwerger, B.; Breitgand, D.; Levy, E.; Galis, A.; Nagin, K.; Llorente, I. M.; Montero, R.; Wolfsthal, Y.; Elmroth, E.; Caceres, J.; Ben-Yehuda, M.; Emmerich, W.; Galan, F. (2009). “The Reservoir model and architecture for open federated cloud computing”. IBM Journal of Research and Development. 53 (4): 4:1–4:11. doi:10.1147/JRD.2009.5429058.
JPMorgan Chase is staking out its own healthcare venture, after its joint project with Berkshire Hathaway and Amazon failed earlier this year. On Thursday, the financial firm announced the launch of Morgan Health, a business unit focused on improving employer-sponsored healthcare, to be led by Dan Mendelson, founder and former CEO of the Washington, D.C.-based healthcare consultancy Avalere Health.
The move comes a little over three months since the joint venture Haven Health, which also aimed to lower employee healthcare costs and boost quality services, said it would be winding down.
Morgan Health will invest up to $250 million in “promising healthcare solutions” and will also enter into strategic partnerships, the company said. The new division, which will be headquartered in Washington, D.C., will also focus on health equity issues.
“JPMorgan Chase has been focused on improving healthcare for its employees for many years,” Morgan Health CEO Mendelson said in a statement. “We are going to take what we’ve learned and accelerate healthcare innovation in the employer-sponsored healthcare market, partnering with and investing in companies that share our goals, and measuring key health outcomes to show what works.”
Mendelson has a background in both health policy and finance. He was an operating partner at healthtech PE firm Welsh Carson for the past two years and served as the associate director for health in the Office of Management and Budget in the Clinton White House prior to founding Avalere. With 165,000 employees in the United States, JPMorgan Chase provides health insurance to around 285,000 people, including dependents.
Haven was announced with much fanfare in 2018, with billionaire Warren Buffet calling rising employee healthcare costs “a hungry tapeworm on the American economy.” Around half of Americans receive healthcare benefits through their employers, according to the Kaiser Family Foundation. The federal government estimates total national healthcare spending reached $3.8 trillion, or $11,582 per person, in 2019. And health spending continues to outpace inflation, growing 4.6% in 2019.
The implosion of Haven three years later demonstrated how even well-capitalized corporate juggernauts could be thwarted by the complexity of the U.S. healthcare system. “We were fighting a tapeworm in the American economy, and the tapeworm won,” Buffet said at Berkshire’s annual shareholder meeting earlier this month, according to Yahoo Finance.
“Haven was supposed to show how creativity, ingenuity and private sector, entrepreneurship could beat the healthcare sector. And it failed,” David Blumenthal, a physician and president of the healthcare think-tank The Commonwealth Fund, told Forbes in an interview earlier this year.
He said the speculation as to one of the big challenges Haven faced was that each company wanted to make its own choices for its employees, which has been the downfall of many similar coalitions. Amazon has also been making its own big push into the healthcare sector recently with a virtual primary care service called Amazon Care, the launch of its wearable Amazon Halo and its purchase of online pharmacy PillPack for $750 million.
The radical change needed to control healthcare costs requires buy-in on many levels, including some that employees might not be happy about, says Blumenthal. It could mean narrower networks of physicians to choose from or requiring travel for certain surgeries so they take place at top-ranked facilities, as opposed to the comfort of a local community hospital.
But the biggest impediments are structural—the lack of purchasing power for employers and consolidation among health systems, he said. “In the end, controlling costs in almost every other Western country is a responsibility that government assumes,” Blumenthal said. “It’s for precisely this reason that the alternatives are not effective.”
Despite what may be an uphill battle ahead, JPMorgan leadership is giving it another go. “Covid has shed light on both the greatness of our healthcare system and its challenges,” Peter Scher, vice chairman of the company who will be overseeing Morgan Health, said in a statement. “The firm has been investing in developing solutions to address social and economic challenges over the past 10 years. We plan to take what we’ve learned there and apply it to healthcare.”
I am a staff writer at Forbes covering healthcare, with a focus on digital health and new technologies. I was previously a healthcare reporter for POLITICO covering the European Union from Brussels and the New Jersey Statehouse from Trenton. I have also written for the Los Angeles Times and Business Insider. I was a 2019-2020 Knight-Bagehot Fellow in business and economics reporting at Columbia University. Email me at email@example.com or find me on Twitter @katiedjennings.
Challenger bank Chime—oh wait, I can’t call the fintech a “bank.” Let me start over. Chime, a provider of products and services that look, feel, and probably even smell like banking products—but regulatorily-speaking, aren’t banking products—got some unwanted attention recently when American Banker reported:
“Chime is nearing a deadline to stop implying that it operates as a bank, according to a settlement agreement with California regulators. Chime must revise language to state that customers can open a checking account ‘through’ the company rather than ‘opening a Chime bank account.’ Chime is also required to state in its paid ads that banking services are provided by partners [and] must name those partners.”
What’s next? Require Apple to publicly disclose that some of the components in its iPhone were designed and manufactured by partners lest it mislead the public into thinking that Apple is an “innovative” company?
Or better yet…
How about requiring Apple to stop implying that there’s no bank involved with its Apple Card credit card when Goldman Sachs—a bank—is issuing the card?
In the wildest delusions of the (regulatorily-legitimate) banking community, as a result of Chime’s agreement with regulators, the challenger not-a-bank will: 1) see its rate of customer acquisition slow to zero, and 2) experience huge attrition among its base of 12 million customers.
Of course, none of that is going to happen. Chime’s customers couldn’t care less about any of this.
Chime’s accounts are—and will continue to be—FDIC-insured. Chime’s mobile app uptime is as good as any “real” bank. Chime answers the phone when customers call (or so I would assume). And the money that consumers have in their Chime accounts when they go to bed at night is there when they get up in the morning.
That’s what consumers care about.
This situation begs three questions.
Question #1: Why Do We Have Bank Regulations?
The answer is simple—and it’s not “to create a level playing field.” It’s “to protect someone.”
Regulators often refer to consumers as the protected party, but in the current case, consumers aren’t the protected party—banks are.
That might strike you as misguided and wrong. It’s not. Banks are required to meet certain regulatory requirements for a variety of things, and as a result, deserve regulatory protection for certain things.
The interpretation of the regulations is where the picture gets fuzzy. Pymnts.com quoted Rep. Maxine Waters of California, the Democratic chairwoman of the House Financial Services Committee, as saying:
“New entities, including big tech firms, are receiving unconventional bank charters and offering bank products and services while evading regulations most banks, including community banks, must comply with.”
Nonsense: 1) There’s no such thing as an “unconventional” bank charter; 2) No Big Tech firm has received a bank charter—unconventional or otherwise; and 3) New entities are not evading regulations since they rely on banks who comply with them.
Pymnts.com went on to quote Rep. Patrick McHenry of North Carolina, the ranking Republican on the financial services panel, who said:
“The private sector is innovating to meet the wants and needs of all consumers. We should be encouraging our regulators to seek regulatory requirements that fit these advancements, not hinder them. Banking must evolve with current times.”
Makes you wonder who the “progressive” here is.
Question #2: If Chime Isn’t a Bank, Then What is It?
“We’re more like a consumer software company than a bank. It’s more a transaction-based, processing-based business model that is highly predictable, highly recurring, and highly profitable.”
Huh? Software companies move fast and break things, release buggy products, and provide mediocre customer service. In addition, Britt’s description of the business model seems to rely heavily on interchange as a revenue source. Chime has to share that with its bank partner, however—which dilutes Chime’s profits.
[Note to Chime’s PR agency: Can you help Chris craft a better description than the one above?]
I asked a few folks in the banking industry what they thought Chime is. According to Chris Nichols, Director of Capital Markets at SouthState Bank:
“It’s a UI layer. A fintech company that specializes in just one aspect of banking for one segment. It’s analogous to aftermarket car customization companies like WCC and Galpin. They sell Fords but they don’t look like Fords or perform like them.”
Bankers’ arguments against Chime often focus on “safety and soundness.” If Chime is simply a UI, how is it negatively harming the underlying product’s safety and soundness? (That’s not meant to be a rhetorical).
Brett King, author of the book Bank 4.0, and founder and Executive Chairman of fintech company Moven isn’t buying Nichol’s description:
“Chime is a bank. Regulation is behind the 8-ball on this. What defines a bank is not a regulatory categorization, but how people use it. What a bank does for people—and how it does it—is evolving. Regulation needs to likewise do so.”
“Rather than focusing on enforcing the distinction between ‘bank’ and not a bank, which, while legally important, may be lost on the average consumer, regulators should focus on updating licensing categories and processes to reflect the evolving consumer financial services landscape.”
“Labels matter. Regulators care about what you call yourself, your products and your services. If you use a label—even casually—that a regulator thinks will deceive or mislead a consumer, you are venturing into the land of UDAAP and consent decrees. So if you don’t hold a charter, don’t call yourself a bank. What is the impact on consumers? Probably not all that much. But that’s not the point.”
There’s little impact on consumers because consumers aren’t the intended protected party here—banks are. And it’s hard to see how current regulations are protecting either party by prohibiting Chime from calling itself a bank.
Question #3: How Should Banks Respond?
Chime has 12 million customers. Is it because they’ve flaunted regulations and taken unfair advantage of incumbent institutions?
No. It’s because its products and services meet the needs of its low- to middle-income base of customers—consumers that many banks either overlook or under-prioritize.
And Chime partners with a bank who reaps part of the revenue that Chime generates. Any bank with a charter could have competed for that business—but few did.
Fighting this battle on the regulatory front won’t win the war for banks. To win, they need to innovate and compete.
Ron Shevlin is the Managing Director of Fintech Research at Cornerstone Advisors, where he publishes commissioned research reports on fintech trends and advises both established and startup financial technology companies. Author of the Fintech Snark Tank on Forbes, Ron is ranked among the top fintech influencers globally, and is a frequent keynote speaker at banking and fintech industry events. Want to talk more fintech? Connect on Twitter or LinkedIn.
Barclays has identified payments as a key growth opportunity worth £900 million over three years thank to areas such as merchant acquiring and the BNPL market.
On an analyst conference call about the bank’s first quarter results, CEO Jes Staley revealed that payment now account for eight per cent of Barclays’ total income – £1.7 billion last year.
Staley says this number can grow by around £900 million over the next three years, with double digit growth in three areas: unified payments, “next-gen” commerce, and wholesale payment fees.
In November last year the bank moved into the buy now, pay later sector through a partnership with Amazon in Germany, offering customers a rolling credit line for future purchases from the e-commerce giant. The initiative is now being extended to the UK.
“This will grow our presence in e-commerce in two of the largest markets in Europe,” says Staley. “Our partnership with Amazon reflects our growing focus on payments.”
Barclays is the only major bank-owned acquirer in the UK and has managed to slash on-boarding times in the last couple of years from 14 days to two days through digitisation.
However, Staley says “we still have a long way to go,” adding that: “Perhaps the most important investment Barclays will make in the next five years is to connect our small business banking and our merchant acquiring business, particularly as it relates to e-commerce.”
Meanwhile, the bank is working on an initiative called Barclays Cubed to better connect merchants and customers.
Staley offers up a scenario: “A merchant is able to connect with a consumer digitally by offering a discount via their Barclays mobile banking app. That consumer can then make a purchase on the merchant’s website and, if they choose to, we can instantly approve them to pay for their shopping using instalments.
“Finally, the digital receipt and the loyalty points are automatically added to their Barclays wallet.”
Jul.29 — Jes Staley, chief executive officer of Barclays Plc, discusses recent volatility in financial markets, investment banking market share, and efforts to improve diversity. He speaks on “Bloomberg Markets: European Open” after the London-based bank’s securities division reported a 60% gain in foreign-exchange, rates and credit trading revenue as the aftermath of the coronavirus pandemic whipsawed markets.
For America’s biggest banks, the past twelve months have been one of the biggest tests of their resilience in history. The Coronavirus pandemic all but shuttered the U.S. economy for months, spurring enormous shifts in business and consumer habits. Lenders big and small, from America’s four megabanks to small regional firms, have passed their test with flying colors.
Despite some of the sharpest drops in gross domestic product and employment ever witnessed, banks were able to serve their customers and remain profitable. In 2020, there were just four bank failures in the U.S., despite the extraordinary economic circumstances. Only about 5% of banks nationwide were unprofitable, according to data from the Federal Deposit Insurance Corporation, and about 53% of banks reported annual increases in profits in 2020.
The pristine shape is thanks to effective emergency measures implemented by Washington that thawed corporate and mortgage credit markets, offered stimulus and small business aid to Main Street, and allowed for widespread forbearance. These factors helped firms play their role as the financial cog that lubricates the American economy.
Corporations used low rates to issue and refinance debt at record rates in 2020, creating a cash cushion. Homeowners did the same, taking advantage of near-record-low interest rates to purchase homes or cut their interest costs. Technology also played a big role as the banking industry undergoes a digital transformation. Consumers could handle their finances on mobile apps during quarantine, instead of at temporarily closed bank branches, and digital change is helping to bolster profitability.
Not only did the stellar performance help the economy through the pandemic, it has positioned the United States for an enormous economic boom as Americans are inoculated from Covid-19 and the economy reopens in full. Millennials are entering the housing market in droves, industries like software and technology are growing rapidly, and businesses will soon be on the offensive in areas like travel, entertainment and retail.
There are more than 5,000 banks and savings institutions in the U.S., but assets are increasingly concentrated at the top. The 100 largest have $16.4 trillion in assets, representing over 80% of total U.S. bank assets. Asset quality and profitability vary wildly among those institutions. With that in mind, Forbes examined the financial data to gauge America’s Best and Worst Banks.
Born out of the financial crisis of the late 2000s, this is the twelfth year Forbes enlisted S&P Global Market Intelligence for data regarding the growth, credit quality and profitability of the 100 largest publicly-traded banks and thrifts by assets. The ten metrics used in the rankings are based on regulatory filings through September 30. The data is courtesy of S&P, but the rankings are done solely by Forbes.
Metrics include return on average tangible common equity, return on average assets, net interest margin, efficiency ratio and net charge-offs as a percentage of total loans. Forbes also factored in nonperforming assets as a percentage of assets, CET1 ratio, risk-based capital ratio and reserves as a percentage of nonperforming assets. The final component is operating revenue growth. We excluded banks where the top-level parent is based outside the U.S.
CVB Financial, the parent company of Citizens Business Bank, was the top-rated bank in America for a second consecutive year, The Ontario, California-based small business lender was in the top-20 across every metric Forbes tracked, and it shone brightest in its efficiency ratio (39.%), operating revenue growth (41.5%) and posted a negative net charge off ratio. The median bank on Forbes’ list, by contrast, had a 57% efficiency ratio, posted operating growth of just 5.4%, and experienced a charge off rate of 0.17% of average loans. CVB, founded in 1974 and with over $13 billion in assets and over 50 branches across the state of California, has been profitable for 174 consecutive quarters, though a long streak of rising profitability was temporarily broken.
Smaller banks, and those focused on commercial lending, continued to dominate the top levels of the Forbes Best Banks list. Just one bank inside the top-20 had more than $100 billion in assets.
Houston-based Prosperity Bancshares ranked at #2, rising six spots from our 2020 list, thanks to its surging growth. Operating revenue rose 54% in 2020, and the lender performed well in efficiency and capitalization. Rounding out the top-5 were Kalispell, Montana-based Glacier Bancorp, Colorado Springs-based Central Bancorp and Conway, Arkansas-based Home BancShares. Average assets in our Top-5 was just $20 billion.
In the top-10 were McKinney, Tx-based Independent Bank Group, #6, DeWitt, NY-based Community Bank System, #7, Bank of New York Mellon, #8, Santa Clara, CA-based SVB Financial Group, #9, and Wilmington, DE-based WSFS Financial. Bank of New York Mellon was one of our biggest risers, gaining 44 spots, and outperforming on loan quality.
For the first time ever, the Big Four of U.S. banking—JPMorgan Chase, Bank of America, Citigroup and Wells Fargo—saw their combined assets exceed $10 trillion, or more than half the U.S. total. None of these banks finished in our Top-50, generally falling due to below-average growth as they set aside massive provisions to deal with the pandemic and were hit by plunging interest rates. JPMorgan Chase ranked highest at #51, dropping eight spots. Citigroup gained 10 spots to place at #65. Bank of America and Wells Fargo both slid, placing at #74 and #98, respectively.
JPMorgan, led by CEO Jamie Dimon, ended 2020 on a high note, reporting a record $12 billion profit as it released reserves built up to handle Covid-19 related economic stress. Despite the extraordinary circumstances, the lender saw average loans and its capital position rise to end the year, and it reported a surge in bank deposits. During 2020, the bank raised over $2 trillion of credit and capital for its clients, spanning ordinary U.S. households to the biggest corporations on the planet.
“In general, the banks have so much capital, so much liquidity and so much capability,” Dimon recently told investors in a December conference, weeks before the bank reported record annual revenues. While Dimon remains concerned about the pandemic as vaccines are distributed, and sees a varied recovery for consumers and businesses, he added of the banking industry, “I think we’re coming out of this looking great.”
Wells Fargo continued to fall in Forbes’ rankings in the wake of a 2016 fake accounts scandal that has cost the bank billions of dollars and led to dramatic change atop the lender. Wells dropped twelve spots in 2019, placing #98, due to a pronounced slump in revenues as the Federal Reserve limits its asset growth.
Over the past 12-months, JPMorgan’s stock has fallen 0.4%, making it the best performer among big banks, which all saw their stocks drop and underperform the S&P 500 Index. Citigroup shares have shed 19%, while Banks of America dropped 7%. Once more, Wells Fargo was the big laggard, falling by a third in value over the past year.
Rounding out the top-100 was Texas Capital Bancshares, #99, and CIT Group, #100.
New York-based business lender CIT Group is in the process of acquiring family-controlled First Citizens Bancshares, which ranked #62. The merger that will create a new diversified consumer and business lender with over $100 billion in combined assets, and a large presence in booming Sun Belt markets like Florida, Georgia and Tennessee. The merger comes a year after the combination of SunTrust and BB&T, which created $499 billion in assets Truist Financial, #48, which created a dominant lender in the Mid-Atlantic and Southeast.
I’m a staff writer and associate editor at Forbes, where I cover finance and investing. My beat includes hedge funds, private equity, fintech, mutual funds, mergers, and banks. I’m a graduate of Middlebury College and the Columbia University Graduate School of Journalism, and I’ve worked at TheStreet and Businessweek. Before becoming a financial scribe, I was a member of the fateful 2008 analyst class at Lehman Brothers. Email thoughts and tips to firstname.lastname@example.org. Follow me on Twitter at @antoinegara
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What’s the New Phenomenon Called “COVID Vaccine Arm”?http://www.psychologytoday.com – Today[…] let me know that she was part of a group of health care practitioners comparing notes after the vaccination and that in her group, one physician had described the same delayed reaction as mine […] represent a long-term safety concern” and were “not considered a precaution or contraindication to vaccination with the 2nd dose […]0
Data Privacy Day 2021: Views and Tips from Top Industry Experts : @VMblog vmblog.com – Today[…] Covid19 and the subsequent vaccination initiatives raise new questions about the intersection of societal health and individual privacy […] A similar choice exists as vaccination becomes more widespread: how do you prove that you’ve been vaccinated without revealing mor […]N/A
Oregon health workers stuck in snow give other drivers COVID-19 vaccine 6abc.com – Today[…] — Oregon health workers who got stuck in a snowstorm on their way back from a COVID-19 vaccination event went car to car injecting stranded drivers before several of the doses expired […] vaccine clinic” took place after about 20 employees were stopped in traffic on a highway after a vaccination clinic […] including one to a Josephine County Sheriff’s Office employee who had arrived too late for the vaccination clinic but ended up stopped with the others, officials said […]0
Oregon health workers stuck in snow give other drivers COVID-19 vaccine abc7news.com – Today[…] — Oregon health workers who got stuck in a snowstorm on their way back from a COVID-19 vaccination event went car to car injecting stranded drivers before several of the doses expired […] vaccine clinic” took place after about 20 employees were stopped in traffic on a highway after a vaccination clinic […] including one to a Josephine County Sheriff’s Office employee who had arrived too late for the vaccination clinic but ended up stopped with the others, officials said […]0
Needles are nothing to fear: 5 steps to make vaccinations easier on your kids medicalxpress.com – TodayThe COVID vaccine rollout has placed the issue of vaccination firmly in the spotlight […] So it’s important to establish positive attitudes towards needle procedures, particularly vaccination, early in life […] may result from feelings of powerlessness due to being under-informed or being “tricked” into a vaccination […] The guide below offers a strategy to help make vaccination a positive experience for your child […]0
Sharing Covid vaccines is in UK’s best interests, say scientists en.brinkwire.com – Today[…] “The critical thing is we must make sure that the schedule that has been agreed and on which our vaccination programme has been based and planned goes ahead […] Prof Andy Pollard, the chair of the UK’s Joint Committee on Vaccination and Immunisation, and one of the researchers behind the Oxford/AstraZeneca vaccine, told th […] University of Southampton, said that while there was an ethical imperative for the UK to support vaccination in lower-income countries, it also had to look after its own […]0
Mashreqbank PSC, Dubai’s third-biggest lender, plans to move nearly half of its employees to cheaper locations and allow some others to work from home as part of a dramatic reorganization that will spare its Emirati staff, according to people familiar with the matter.
The oldest privately owned bank in the United Arab Emirates notified employees this week that it will be shifting jobs to locations including India, Egypt or Pakistan, the people said, asking not to be identified because the information isn’t public.
Mashreq will also eliminate a significant number of existing roles and create new positions for staff moving to what it calls “centers of excellence,” they said.
The bank didn’t immediately respond to an email seeking comment. Mashreq and its subsidiaries employed almost 5,000 people as of September 2019.
As the pandemic transforms how and where people work, the planned move is an echo of a shift by other financial firms that are looking to set up bases in lower-cost locations. In the U.S., companies from Goldman Sachs Group Inc. to Paul Singer’s Elliott Management Corp. have looked outside Manhattan and bulked up their presence in Florida.
Lenders around the world have cut thousands of jobs as they slash costs to weather an economic downturn and adapt to a move to digital services. Banks in the Gulf’s expatriate-dominated economies additionally have had to contend with a period of lower oil prices and weaker profitability.
While shifting back-office operations to cities where salaries are a fraction of what bankers earn in the UAE isn’t entirely new, the scale of the planned shift by Mashreq is sizable.
Some employees will be permanently allowed to operate remotely in the offshore centers, the people said. The company is planning to lower salaries for an additional 7% of its remaining UAE staff by turning those jobs into work-from-home positions.
The relocation plan is expected to be completed in three phases by October this year. The changes will exclude Mashreq’s Emirati employees, the people said.
As a part of the 50 years celebration, Mashreq has launched ‘#HeritageSeries – Connecting with UAE’ with Gulf News. The first episode of the Heritage Series is E11: The Road that Unites the UAE. In this chapter, we look at how the development of the E11 highway tells the story of overcoming old divisions and building the Union. The E11 is a notable and enduring symbol of the diversity of the UAE. The E11 is the spine of the UAE. As quoted by Abdul Aziz Al Ghurair, “The E11 joined the country: it brought us closer together, doing business became easier, and the tangible activity along the road spells out its success today. In much the same way that the E11 has endured, thrived and grown to be a great unifier across this nation, the growth at Mashreq has run parallel alongside it. We grew together, endured many changes in the environment and today, both are living symbols of a unified country.” Know more: http://bit.ly/M50HeritageSeries Read More: http://bit.ly/mashnews50yrs
Wirecard filed for insolvency in June after the accounting scandal came to light, and now the administrators have announced that Santander will pick up “several highly specialized technological assets” from the defunct company, as well as around 500 of Wirecard’s staff.
The technology and the staff will be subsumed into Santander’s Getnet business, which provides a range of payment and e-commerce solutions.
Santander is keen to stress that the deal does not leave the bank liable for Wirecard’s past misdemeanors. “The acquisition does not include Wirecard companies and Santander will not assume any legal liability relating to Wirecard AG and Wirecard Bank AG or its past actions,” Santander’s statement states.
Wirecard’s creditors are expected to find out more details of the winding-down process this week, with the administrators having to deal with dozens of lawsuits from investors.
It was the suspension of Wirecard’s U.K. subsidiary, Wirecard Card Solutions (WCS), that prompted the banking crisis in the summer. The U.K.’s Financial Conduct Authority (FCA) suspended activity at WCS for several days until it was reassured customers’ money wasn’t being transferred out of the business, leaving millions of banking customers unable to access their funds.
WCS has since sold many of its card technology and other assets to Railsbank, although many of the banking services that previously used Wirecard have since moved to alternate payment providers or have set up such services themselves.
I have been a technology writer and editor for more than 20 years. I was assistant editor of The Sunday Times’ technology section, editor of PC Pro magazine and have written for more than a dozen different publications and websites over the years. I’ve also appeared as a tech pundit on television and radio, including BBC Newsnight, the Chris Evans Show and ITN News at Ten. Hit me up if you’ve got a tech story that needs breaking at email@example.com.
In 2019, half of all community banks and credit unions opened less than 5% of their new checking account applications in digital channels. Granted, there were some who opened far more than 50% of their checking accounts digitally—but they were few and far between.
But community banks and credit unions accounted for just 15% of all checking account applications in 2019.
Megabanks—Bank of America, JPMorgan Chase, and Wells Fargo—and digital banks, however, accounted for roughly 55% of all checking account applications in 2019, 63% in Q1 2020, and 69% in Q2 2020.
With the megabanks’ and digital banks’ focus on digital channels, checking account openings in digital channels exceeded branch openings in 2019, and grew to 66% of the volume so far in 2020.
Digital Account Openings Overtake Branch Applications
Simply looking at the total number of checking account applications by channel overlooks an important difference in consumer behavior, however:
Consumers open more checking accounts through digital channels when applying for a secondary account than when they open their primary account.
Primary Account Applications
Nearly two-thirds (64%) of the checking account applications taken during the height of the Coronavirus crisis in Q2 2020 for what consumers considered their primary account were submitted either online or on a mobile device.
That was up from 59% in the first quarter of the year.
The transition point was sometime in the second half of 2019 when, for the first time, digital applications for primary accounts exceeded branch applications.
There is an emerging dynamic skewing checking account applications away from branches, however: The rise in the secondary checking account.
Secondary Account Applications
Cornerstone’s consumer research, commissioned by Velocity Solutions, found that 35% of Americans have more than one checking account. These secondary accounts are opened in digital channels at a faster pace than those intended to be consumers’ primary accounts.
In Q2 2020, roughly three-quarters of the applications consumers submitted for their secondary checking was done through digital channels, up from 65% in the first quarter of the year.
The crossing mark happened between late 2018 and mid-2019 when 60% of applications for secondary accounts came in on digital channels.
Consumers Rate The Mobile Process Higher
Across 10 aspects of the checking account opening process, a larger percentage of consumers who opened an account in the past three years rated their experience on the mobile channel as “excellent” than consumers who applied online or in a branch.
Bankers like to believe that consumers open checking accounts in branches because they want human assistance and assurance in making the right decision. There may be some truth to that, but according to Cornerstone’s study:
The rest of the experience isn’t as good as it is in a digital channel, and
Consumer ratings of the quality of the branch experience haven’t improved over the past few years (and have actually declined in some aspects).
For example: Among consumers who opened an account in a branch more than three years ago, nearly half (46%) rated the number of steps it took as excellent. Of the consumers who opened an account in a branch within the last three years, however, just 37% rated that aspect of the process as excellent.
The Hard News For Community Banks and Credit Unions
The pandemic forced many mid-sized financial institutions to accelerate their digital account opening efforts as branches were temporarily closed.
It also forced them to re-think some long-held assumptions.
As mentioned above, many bankers believe that consumers open checking accounts in branches because they want human assistance in making the right decision. There may be some truth to that, but it’s overstated. Choosing a checking account isn’t rocket science.
Investing in improvements to the branch-based account opening experience, at this point, is crazy.
Competing With the Megabanks
The three megabanks have an outsized share of the Millennial market. It’s not just because of digital account opening, but thanks, in part, to superior mobile banking capabilities.
Community banks and credit unions will find it nearly impossible to beat the megabanks at that game.
Instead of trying to compete head-on with the big banks to be consumers’ primary checking account provider, the community-based institutions should strive to get a foothold in consumers’ financial lives by being their secondary checking account provider.
Consumers choose a secondary account for a wide range of reasons including better interest rates, better rewards, and better personal financial management tools.
It’s still going to require a good digital account opening process, however.
To see more of the research, click here for a copy of the report The Reacquisition Imperative: Why Financial Institutions Must Reacquire Customers Through Engagement. Follow me on Twitter or LinkedIn. Check out my website.
Ron Shevlin is the Managing Director of Fintech Research at Cornerstone Advisors. Author of the book Smarter Bank and the Fintech Snark Tank on Forbes, Ron is ranked among the top fintech influencers globally, and is a frequent keynote speaker at banking and fintech industry events.
Neobanks — digital-only banks with industry-leading capabilities that don’t operate physical branches or rely on legacy back-ends — have exploded onto the global scene in recent years.
Increased consumer interest in neobanks is stimulating competition globally, creating an increasingly competitive landscape which has driven neobanks to roll out extravagant features, like overdraft protection and sign-up incentives.
Beyond scaling rapidly by user count, neobanks are navigating the best route to profitability. Today, the average neobank loses $11 per user, per Accenture, and though neobanks’ expenses are partially offset by not operating costly branch networks, they still need to find sustainable business models.
Some major strategies are beginning to coalesce: Most neobanks operate under a “freemium” model, in which they offer their product for free, but charge for additional features, while others offer multitier subscriptions with varying levels of premium accounts. Additionally, other players are targeting niche segments, like small businesses or gig economy workers, in their pursuit of profitability.
In The Global Neobanks report, Business Insider Intelligence explores how the neobank market has grown rapidly, and what’s in store as the industry pivots from hyper-growth to sustainability. We discuss how 26 neobanks in key global markets are prioritizing scale versus profitability, identifying best practices to emulate and pitfalls to avoid.
The companies mentioned in the report include: ABN Amro, Adyen, Ant financial, ANZ, Aspiration, Banco Inter, Bank Leumi, Banco Sabadell, Banco Votorantim, Bnext, bunq, Chime, Commonwealth Bank of Australia, Dave, Finleap, ING, Judo, Klar, Kuda, Mastercard, Monzo, Moven, MYbank, National Australia Bank, Neon, Nubank, N26, OakNorth, Open, Pepper, Penta, Revolut, Raising, Rabobank, Santander, Starling, Standard Chartered, Tandem, TD Bank, TransferWise, Tencent, Uala, Uber, Volt, Varo, WeBank, Westpac, Xinja, 86 400.
Here are some key takeaways from the report:
With an estimated 39 million users globally, neobanks’ valuations have skyrocketed thanks to their attractive value propositions which include personal finance management features, low rates, and superior user experiences. But the same features that have helped neobanks catch on have pushed profitability further out of reach. Neobanks have been forced to roll out flashy features to stand out to users, and marketing these features has driven up expenses. There’s no universal path to profitability for neobanks — but a few major categories are emerging. Freemium pricing strategies, multitiered subscriptions, and targeting niche demographics are three strategies neobanks are employing in pursuit of profit.
Individual neobank landscapes vary by market, but their inherent advantages are allowing neobanks to emerge in markets globally. Regional factors have made certain markets particularly ripe, such as fintech-friendly regulations, negative consumer perceptions of incumbents, and gaps in banking services for underbanked populations.
In full, the report:
Sizes the neobank market by value, number of users, and number of accounts to 2024. Explores the factors that will propel the neobank market to new heights over the next five …read more
Dear banks, Game Over. Disruptive challenger banks are here to wipe the floor with traditional banks, who have, according to Chad West, head of comms and marketing at challenger bank Revolut, failed to make their offering open and transparent to customers, and failed to give them control over their money. Digital bank alternative Revolut has scaled to 1.8 million customers in three years – and now offers cryptocurrency processing.
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