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Higher Net Interest Margin With Less Risk—Fact or Fiction?

by | Consulting

Net interest margin. Three of my favorite words. Why? Because it is such an important component of what takes a bank to the top of its peers. And if you’re tired of being average and competing on rate, I’m going to tell you that there is a way out of that mess. 

And, in fact, I would suggest that the banks that don’t figure out how to avoid matching rates soon are probably not going to maintain their independence going forward. 

That’s because there is more competition than ever, and banks are undercutting each other on pricing and compressing their bank’s NIM even more. And yet …

There are banks that command premium pricing

Which makes you wonder what they know that you don’t: 

  • How did they get out of competing on rate? 
  • How do they position themselves?
  • How do they identify those customers who are likely to pay premium pricing?
  • How can they charge their customers for $20,000 extra, and the customer thinks it is the bargain of the century because of what they do?
  • Why do their customers tell them that what they bring to the table is different, that it’s worth millions to them?

What is their secret?

Their secret is that they don’t have to compete against competitors anymore because none of their competitors have the special uniqueness they offer. 

You think it can’t be done? Well, maybe you should hang out with the folks who are getting it done. Because if you can’t suspend disbelief and aren’t willing to say, “Maybe there’s something we don’t know,” I can guarantee you that you will continue to match rates and decrease your net interest margin. And I don’t think your bank can continue to do that anymore. 

Let’s face it, the big banks have a competitive advantage in pricing. We can’t compete in that space. But there will always be room for community banks like us, the boutique bank that adds tremendous value, that knows that they’re worth more and doesn’t say those lame things like, “We have good people, and we have been around for 120 years.” That’s not going to command more than 20 basis points more, and you can’t make it on 20 basis points more regardless.

This is the time to bring in additional pricing. Do you want to learn how? I’m teaching a special class on how to do it. I hope I see you there.

– Roxanne Emmerich

Please watch the video above and share it with your exec team and board.

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