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Are You Focused?
What do some of the top ranked banks in the nation have in common, and what can other banks learn from them?
This week, Bank Director released the third quarter issue of Bank Director magazine for subscribers. Every year in this issue, we rank the performance of the top U.S.-based commercial banks among the 300 largest publicly traded institutions in the nation. Although annual rankings have their drawbacks, there are some interesting trends when you look at the banks that perform well year after year.
Take Live Oak Bancshares, the Wilmington, North Carolina-based Small Business Administration lender that ranked No. 19 overall. When it started up in 2008, it decided to go branchless, and lent only to small businesses on a national scale.
And Phoenix-based Western Alliance Bancorp, the No. 1 bank in its asset class above $50 billion, specializes in niche lending as well.
Don’t forget Los Angeles-based East West Bancorp, No. 2 above $50 billion, which has carved out a niche in international trade finance and serves Asian Americans and other minorities.
And the third ranked in the large bank category, Capital One Financial Corp., combines a high-yielding credit card business with low-cost deposits.
“A lot of success for folks that are consistently high performers comes down to focus,” says Jim Burson, a consultant and managing director with Cornerstone Advisors. Even traditional diversified financial institutions that consistently outperform their peers tend to have a niche business hiding under the leaves, Burson says. Many of the top performing banks invest in technology to drive efficiencies and compete successfully — banks such as Capital One and Live Oak have committed to that for years. They’ve been able to grow revenue faster than expenses, creating positive operating leverage. Plus, they tend to have specific goals in mind: saying 50% of all their small business loans ought to be originated digitally, for example, rather than remaining unfocused in their goals and buying technology tools that aren’t used.
The banks that excel year after year combine high profitability in terms of return on average assets, return on average equity with strong asset quality and capital. This year, we added a new metric, total shareholder return, to better align the ranking with the interests of shareholders. Also this year, we’ve renamed the list RankingBanking and trimmed it down to the top-ranked banks in each asset category. The full ranking of the 300 largest publicly traded banks will appear in August in a special report on BankDirector.com.
• Naomi Snyder, editor-in-chief of Bank Director
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