by steve brown, pcbb january 2020
TRANSCRIPT
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Executive Development Program
- Industry Big Picture & Evolution -
By Steve Brown, PCBB January 2020
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Session Timing and Purpose
Session schedule □ 8:30am to 12:00pm □ 20 minute break at 10:00am Exploring the banking industry □ Fundamentals □ Importance □ Changes □ Leadership □ Into the future
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First - Smile & Say Hi
Source: adastra.fit.edu
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What Brings You Here?
Source: chartcons.com
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Part 1: Looking Back to Look Forward
Source: discoverhistoricaltravel.com
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Historical Economic Growth
Source: fred.stlouisfed.org
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Historical Unemployment
Source: fred.stlouisfed.org
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Longest Expansion Ever – 126 Months (Jan)
Source: https://www.statista.com/chart/18513/length-of-us-expansions/
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Business Activity Runs in Cycles
Source: coursehero.com
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But Also Keep In Mind…
Source: azquotes.com
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Cycle Example: Quick Story - In The Desert
Source: bo yoga
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Part 2: Age Might Frame Thinking
Source: washingtonpost.com
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Most Recent Recession
Source: coursehero.com
Great Recession of 2007 – 2009 □ Once in 100Y event □ Technically lasted 18 months □ Worst crisis since 1929 Great Depression □ Took almost 10Ys to fully get back to “normal” Typical Recessions □ Last 10 months on average
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Great Recession Cause
Source: Tutor2U
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Great Recession Timeline
Source: Business Insider
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But Much Has Changed Since Then
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Quick Story – An Elevator Ride
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Part 3: America in Perspective
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The World’s Top Reserve Currencies
Source: howmuch.net
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US State GDP vs. Entire Countries
Source: howmuch.net
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Top 10 Countries vs. US States - 2019/2020
Source: focus-economics.com
CA+NY = $4.4T
TX = $1.7T
17 states = $14.2T
CA+TX+IL = $5.3T
CA = $2.8T
IL+PA+NJ = $2.2T
24%
15%
6%
5%
4%
3%
3%
3%
2%
2%
Percent of the global economy
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US GDP – A Closer Look
Source: Bureau of Economic Analysis
2.1 2.0
3.1
1.1
2.9 3.5
2.5
3.5 3.2
2.2 2.3 2.0 2.2
1.9 2.0
0.1
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US GDP – Even Closer Look by State
Source: Bureau of Economic Analysis
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FF 1.50% to 1.75% is Accommodative
Source: Federal Reserve
Flat for 7Ys +425bp in
2.2Ys
+350bp in
7.5Ys +200bp in
3.0Ys
-75bp in
4 mos.
+400bp in
2.6Ys
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Quick Story – All American Fed Funds
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Part 4: Banking Industry
Source: CSBS survey of community bankers
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Starting Simple – How Banks Make Money
Loan Payment
Deposit Payment
Borrower
Depositor
$
$$$
Net Interest Margin (NIM):
Net Interest Income – Net Interest Expense Average Interest Earning Assets
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NIM Decline from Lower Rates/Leverage
Source: Fed SF, as of Q3 2019
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Slowing Loan Growth Led by CA, ID, WA
Source: Fed SF, as of Q3 2019
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Core Funding Trails Loan Growth
Source: Fed SF, as of Q3 2019
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So Banks Using More Noncore For Funding
Source: Fed SF, as of Q3 2019
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ALLL Levels Steady
Source: Fed SF, as of Q3 2019
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Capital Levels Remain Strong
Source: Fed SF, as of Q3 2019
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Any Conclusions We Can Draw?
Source: bloggingx
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Part 5: Consolidation
Source: FDIC, number of FDIC insured institutions 2009 to 2019
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A Closer Look At Consolidation Trends
Growing!
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Some New Banks Are Forming
Source: S&P Global Market Intelligence
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Part 6: Competition
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Big Banks Control Pricing Assets <1B
Assets 1-10B
Assets 10-100B
Assets >100B
Source: Institute for Local Self Reliance, FDIC, NCUA – Market share 2018
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Customers Are Leveraging Mobile
Source: Business Insider Intelligence
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So Banks are Closing Branches
Source: S&P Global Market Intelligence
Over the last 12 months, U.S. banks and thrifts have closed 2,889 branches and opened 1,187
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Big Banks Are Investing in Digital
Source: Financial Brand
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43 Source: Financial Brand
Competitors Are Chasing Banks
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44 Source: Financial Brand
So Banks Are Working to Improve
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Quick Story - Competition
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Part 7: Regulatory
Source: CSBS survey of community bankers
Ranks #2
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National Banking Agencies
Source: Fed, FDIC, OCC
Federal Reserve – Currency, Economy, Regulation • Created 1913 • Central bank of USA • Mandate: Max employment, stable prices, moderate long term rates
FDIC – Deposit Insurance, Charters, Receiverships, Regulation • Created 1933 • Insurance for bank depositors in USA
OCC – National Banks, Charters, Regulation • Created 1863 • National banks and federal savings associations • Branches and agencies of foreign banks
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Broader Financial Industry Regulation
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Banking Regulation = A Pendulum
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Banking Regulation = Basis/Structure
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Areas of Regulatory Concern
Source: Fed SF
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More Areas of Regulatory Concern
Source: Fed SF
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Part 8: Technology Drivers
Demographics Customer Behavior
Technology
Regulation
Competition
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We Are In The 4th Industrial Revolution
Source: The Dualarity
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4IR – What Does That Mean?
Source: shockoe enterprise mobile solutions
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Technology Tipping Points
Source: World Economic Forum
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Technology Hype vs. Reality
Source: Gartner Hype Cycle for Emerging Technologies
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Impact on Banking Industry
Source: financialbrand.com
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The Future Looks Different
Source: Everest Group
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Transformation Is Underway
Partnerships/collaboration more common More data being used in more ways
5G networks rolling out w/scale by 2021
Blockchain is moving along
Cloud is mainstream
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Transformation Is Underway
Humans working more and more w/machines Digital payments and greater online
More self service for customers
AI gaining steam
Voice is booming
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And Looking To The Future
Source: PwC, Importance of Digital Technologies Perceived By Bank CEOs
Data Mining and Analysis 89%
Mobile Technologies for Customer Engagement 93%
Socially Enabled Business Processes 70% Internet of Things 67%
Cybersecurity 93%
Battery and Power Technologies 35% Cloud Computing 63%
3D Printing 12%
Wearable Computing 35% Robotics 19%
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Quick Story - Landing on Blockchain Moon
Source: Nasa
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14. Critical To Transform The Biz Model
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Part 9: All About The Customer Now
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Understand Change Is Happening
Source: i-scoop
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Rip Out The Wires
Industry is hardwired toward old ways □ Structured in “pipes” by department □ Specific role to play can result in a narrow focus □ Departments not oriented around the customer
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Work Within The Rules
Industry heavily oriented around rules □ Thousands of regulations since crisis □ Regulatory tone remains aggressive □ Mistakes can be costly to bank & employee
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Increase Customer Information Now
Customer view is limited □ Industry upheaval has impacted data quality □ Heavily reliant on “peer” data □ Limited systems flexibility available in the industry
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Focus On Balancing Both Human + Digital
Digitally enabled services
Fully digital, self-service
Improved human interactions
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Appendix
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Brain Complexity = 20 Human Biases
Source: erc.europa.eu
All 20 are described in detail in the appendix
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Human Biases
Source: thejobnetwork.com
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Human Biases
Source: thejobnetwork.com
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Human Biases
Source: thejobnetwork.com
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Bias Example: Quick Story - Picking A Name