It creeps up on you…usually in a moment of desperation.
A prospect comes in and says “So and so bank down the street offered rate X. If you can get me a loan at a rate that is half a percent lower, then you have my business.”
Now you feel trapped. You want to close this deal, but you know if you lower your rate, the deal won’t be profitable…but you know if you don’t lower your rate, the prospect walk out the door and down the street to do business with your competitor—and then it happens…
You lower your rate to “buy the business.”
The temptation to rate match has become an epidemic in community banks across the country.
Is having a good year in 2015 going to impede your chance of having a spectacular 2016?
What if this next year HAD to be twice as good as last year?
And what if instead, you changed your framework from “have to” to “get to” to make this the best year ever?
Jim Collins, the author of the perennial business bestseller, Good to Great, taught us that attachment to “good” impedes the possibility of greatness.
But what if you’re already great? Well then, the attachment to great impedes the possibility for extreme mastery.
Here’s the thing about price: matching price is an addiction. When you’re discounting, it has a debilitating future impact on so many different things. It sabotages your ability to recruit, hire, and train the very best. It deteriorates your best customer service efforts, because you can’t invest in the customer service that you have. It doesn’t allow for you to have cutting-edge products and services, because the money’s not there. You have no top-line products, and you are not a salable equity, because your multiple of book is reduced when people are looking at purchasing your bank.
It’s happening again. The regulators are cranky, yet again, and this time for some good reasons. They’re a little heavy-handed right now on banks that are not mastering the deposit strategy and the execution of that strategy.
They’re looking at six key issues—first, relationship depth. Do you have cross-sales on those accounts? Especially your large deposit accounts—make sure that you’re getting the number of cross-sales up to six or seven on each of those accounts.
Number two is obvious, location. They’re thinking that deposits will stick with you if they are around.
Regulators and bankers have one common concern right now—get and keep deposits as interest rates go up. Sounds easy, but it hasn’t been all that easy just to get deposits when rates have been low, and so getting better at this immediately is important.
I’m going to cover five must-do-now strategies that you need to have happen pronto to make sure that you get and keep those deposits to weather this upcoming storm.
Make sure that your commercial bankers understand how to bring in million-dollar checking accounts.