Influx Insights Tag Feed: banks

banks aren't trusted

Influx Insights — 2010-01-26T11:31:15Z

Edelman has just released it's annual survey and to prove it seems to be measuring the right things, the data it uncovered on banks is astonishing- their trust rating has plummeted like a stone- from the 3rd ranked sector in the US to the 9th and a rating drop in excess of 30 points.

Looking at this data, it provides some insight as to why the President acted as he did.

However, there's more to this story than meets the eye and more questions to ask.

- What type of banks don't people trust?
- What is it about banks that they don't trust?

I am sure Edelman have this data and it would be great to see it if they do.

Banks clearly have a huge issue that is in crisis proportions and something they need to devote a lot of energy towards. Simply ignoring the issue and hoping it will go away, isn't going help. These institutions need a whole way of thinking about how they need to relate to and communicate with their customers and beyond this need ideas that prove they are to be trusted.

Posted by Ed Cotton

the new american dream- a debt free life?

Influx Insights — 2010-01-20T18:49:34Z

It looks like Americans are becoming allergic to debt, the numbers had been accelerating upwards every single year, The Fed started records in 1979, now it looks like they are tumbling downwards. What defines a country when new homes, new cars and the debt financing of those material possessions are all in decline?

Posted by Ed Cotton

where's the economy really at?

Influx Insights — 2009-12-10T12:24:01Z

It's hard to keep track of the economic news these days with various divergent perspectives and points of view, but it pays to listen to the experts and in this case, Tim Geithner , who heads up the US Treasury.

Here's a quote from a testimony he gave to congress yesterday.

"However, the financial and economic recovery still faces significant headwinds. Unemployment remains high, along with foreclosure and delinquency rates. Although RealtyTrac's October report shows a third straight month of decreasing foreclosure activity, foreclosures are still up nearly 19 percent since October 2008. And delinquencies of subprime residential mortgages reached over 26 percent and conforming mortgages nearly seven percent in the third quarter. Further, according to First American CoreLogic, roughly one in four homeowners owed more on their mortgages than the properties were worth in the third quarter of 2009. These conditions place enormous pressure on American families and homeowners.

Bank lending continues to contract overall, although the pace of contraction has moderated and some categories of lending are growing again. For example, commercial and industrial loans contracted at an annual rate of 27 percent in the third quarter, but 16 percent since then. Such loans are particularly important for small businesses, which generally cannot raise money by issuing debt in securities markets. Meanwhile, residential mortgage loans from banks have increased at an annual rate of two percent since the third quarter.

The contraction in many categories of bank lending reflects a combination of persistent weak demand for credit and tight lending standards at the banks, amidst mounting bank failures and commercial mortgage losses. There have been 130 bank failures this year, compared with 41 over the decade that preceded the current recession. And the number of banks that the FDIC classifies as "problem institutions" has reached over 550 this year, compared with 76 in 2007 and 252 in 2008. Further, FDIC-insured commercial banks reported that net charge-offs--that is, losses that have occurred--increased to 2.9 percent as a share of loans and leases in the third quarter, up from 0.6 percent before the recession. And delinquencies of commercial real estate loans were nine percent in the third quarter and increasing.

Banks' willingness to lend also has a significant impact on consumer spending and, consequently, economic growth. Macroeconomic Advisors, a consulting firm, found that a 10-point increase in bank's willingness to make consumer installment loans yields a 0.3 percentage point increase in personal consumption expenditures."

So, what's he saying...

- Foreclosures are still around and bigger than they were in 2008, but activity is decreasing.

- A quarter of all homeowners owe more on their property than their property is worth.

- Mortgage loans are growing, but banks are not lending to business.

- Banks are still in trouble- 130 bank failures this year and 550 classified as "problem institutions".

While many are talking about recovery, these factors which don't even examine unemployment, suggest this is going to take time.

Posted by Ed Cotton

smoothies, banks and the trust gap

Influx Insights — 2009-12-10T12:27:39Z

Everyone knows that many banks are still in trouble and most people have a clear idea where the blame lies, with the banks themselves. Quite simply, there's no love lost between bank customers and the executives who are seen as part of a financial establishment that's taken advantage of exploitable opportunities, often at the expense of the customer and taxpayer.

A bank should only go begging to its customers for understanding if there was a well of support and a high degree of respect for the brand and the category. Anything short of a stellar reputation and it's going to end badly. Now is not the time for such a plea.

However, Westpac in Australia seem oblivious to current sentiment. The bank sent out an email film to its customers explaining in the most patronizing way how the financial system worked and why bank rates where heading higher.

Given what people have been through with banks and the endless press on bonuses and the stratospheric pay packages of banking's top level, it's impossible to understand how Westpac's customer base could be sympathetic to the plight of a bank who now faces higher costs for borrowing money.

One can just imagine how this film came to be, harried marketing executives believing that if only the ignorant public could understand the reasons why money now cost more, things could be better, taking this thought to their ad agency and getting them to make an "educational film". The problem here is that the voice is all wrong, there's no empathy, understanding or even a recognition of some intelligence on the part of their customers. The fact this made it though the system shows an institution with a very low EQ and one that fill find its little exercise in education ends up losing it a ton of valuable customers.

Banking still has a lot to learn from how to respond to the current crisis. It does not seem like any of them get it, most don't want to acknowledge the realities of a changed context and a changed relationship. Most of the recent marketing efforts fall short, they show a lack of an insight and an inherent desire to turn the clock back to the days of old.

Recent research data from Bloomberg shows that Americans are pretty angry with bankers.

"Two-thirds of Americans say they have an unfavorable view of financial executives. More than half say big financial companies, which are expected to pay record yearend bonuses, are out only to enrich themselves and also should not have received government aid. "

The incumbents failure to get it right, could leave the door open to a smart opportunist who gets exactly what the consumer is looking for now, doesn't show the same patronizing attitude of old and finds a way to provide superior services at a much lower cost.

Posted by Ed Cotton

is this bank really any different?

Influx Insights — 2009-06-09T18:14:13Z

Of course, the time is right to launch a new bank complete with a new set of values, but importantly, a new way of doing things. Banks have been masters of trying to tell a story of change and doing very little about it.

Ally Bank is a new entity that's arisen out of the former GMAC. It should have been a chance to doing something very different, but it still looks like old banking.

Here's what they say on their website.

"We are Ally Bank, built on the foundation of GMAC Financial Services. And with that experience we’ve learned that these times demand change and a new way of doing business. So we’re taking banking in a new direction.

We’re a bank that values integrity as much as deposits. A bank that will always be open, accountable, and honest. Yes, honest. We won’t deal in half-truths, kindatruths, or truths only buried in fine print. That’s because we don’t have anything to hide. We’re always going to give it to you straight.

That means no monthly fees, no minimum deposits, and no minimum balances. It means developing new products that give you more options, like our No Penalty CD that lets you withdraw your money if you need to. And it means keeping our promise that our rates will always be among the top. It’s just the right thing to do."

Is this bank really doing anything different, it sounds good, but the promises and products seem fairly standard.

If the financial services industry is going to rebuild its reputation, it's going to need to invest in some serious product development. Without this, it's just going to be a series of hollow promises.

Posted by Ed Cotton

if you want to understand the financial crisis...

Influx Insights — 2009-05-21T12:54:56Z

If you want to understand why we are in the mess we are in, you can do worse than read or listen to Gillian Tett.

Gillian studied Social Anthropology at Cambridge and then went into journalism with the Financial Times. Most books on finance are pretty dull affairs, but her book Fool's Gold, which tells the story of the derrivatives team at J.P. Morgan reads like a thriller.

You can get a sampling of her intellect and storytelling abilities by listening to a lecture she gave recently at the London School of Economics.

Posted by Ed Cotton

vanishing money

Influx Insights — 2009-01-21T11:08:08Z

Nice visual from JP Morgan on current market caps for banks around the world.

Via Paul Kedrosky

Posted by Ed Cotton

brand utility for tough times

Influx Insights — 2008-12-09T16:19:07Z

Obviously, it's critical to make sure your brand and products are relevant to current consumer needs. The financial downturn has given banks and investment houses the opportunity to re-connect and show how they can be useful in challenging times. Wells Fargo has responded to this need by creating the Wells Debt Down Solution. It's a new product that allows consumers to consolidate their high interest debt and find a workable way of paying it off.

We are used to banks being slow and unresponsive when it comes to product development and it's therefore great to see Wells responding to real consumer needs and offering something useful to consumers.

Posted by Ed Cotton

top gear's clarkson on investing

Influx Insights — 2008-10-09T20:15:48Z

Top Gear presenter, Jeremy Clarkson- a wealth man made rich by celebrity vents his frustration at the banking system and the current crisis.

"As I sat there on that horrible Monday, watching the whole financial world on the brink of collapse, I thought back to all the midnight oil I’d burnt writing these columns, all the crappy hotels I’d stayed in while making various television shows. And how all of that revenue would be lost for a raft of reasons I simply didn’t understand.

Of course I made strenuous efforts to get my money out of AIG as soon as the scale of its problems became apparent. But it wasn’t possible. It had shut the fund in which I’d invested and it would remain closed for three months while it tried to sell the assets. “We need to do this in an orderly fashion,” said the man on the phone, calmly.

Inwardly I was screaming. I don’t give a shit about an orderly fashion, any more than a man in the trenches wants to look smart while running for his life. It’s my money. I gave it to you. You’ve squandered it on a Mexican’s house in San Diego and a stupid football team and that’s your problem. Not mine.

It turned out, however, that I was wrong. It was my problem, so I decided to try to understand banking. And what I’ve gleaned from a two-week crash course is that it is completely unfathomable. There isn’t a single person in the entire world who has the first idea how the system works."

Posted by Ed Cotton

green is more than the color of currency

Influx Insights — 2007-06-14T14:19:45Z

Since "Who Killed the Electric Car" and "The Inconvenient Truth" green has been top of mind; so it's not surprising to see a recent trend of corporations following the money and jumping onto the green band wagon.

Recent commitments to green initiatives by the financial sector are creating talk that energy will be a bigger business revolution than the Internet. It’s easy to understand why with the kind of money we’ve recently seen flowing from big banks. MSNBC reported that Citibank pledged $50 billion to curb emissions and plans to invest $31 billion in clean energy and alternative energy over the next 10 years. This announcement was followed by a $20 billion commitment to support growth in environmentally friendly activities to reduce global warming by Bank of America. Clinton recently spoke about supporting initiatives with a plan for 5 major banks to fund green initiatives by creating financing solutions that will facilitate the construction of green buildings.

European initiatives include a recent commitment of 378 million Euros by a group of banks for the financing of the first ever offshore wind farm that will power 125,000 homes. These are the kind of projects that banks will start investing in in the future.

These programs are step one of a two-part initiative which also requires the weening off of dirty energy. What this means for financial institutions as well as investors is a careful balancing act that would eventually mean less financing of coal-fired power plants and other emissions emitting energy sources.

Financial institutions are looking to adopt new green programs that are becoming increasingly attractive to their consumers. Wells Fargo just added eco-friendly choices for it’s reward card holders and BAC and Citi plan to follow. This will let consumers accumulate green points that can be used to benefit clean energy projects.

These initiatives are important to consumers, a LOHAS poll revealed that:
- 68% state that knowing a company is mindful of its impact on the environment and society makes them more likely to buy their products and services,
- 52% state that it makes them more likely to buy stock.

Corporate boardrooms are taking note and the implications will be far reaching.