money-pig.jpg
money-pig.jpg

Top 10 Ways Georgian Banks Can Grow in 2012

2 mins read

The FINANCIAL — During recent years, consumers and businesses alike have been in survival mode. Many industries, including banking, have cut costs to weather the recession. However, austerity alone will not lead to long-term growth.

 

Even in the midst of current industry challenges, banks can take simple steps to grow in the year ahead. With the squeeze in interest margins, decrease in lending opportunities and increase in capital-level requirements, bankers need to focus more clearly on where to deploy capital for the greatest return.

Grant Thornton suggests 10 ways banks can grow in 2012.

1. Focus strategic plan on growth — Now that many companies are shifting from survival mode to seizing opportunities in an improving economy, banks should develop and modify their 2012 strategic plans with a renewed focus on growth objectives. Banks need to find new sources of revenue to succeed going forward.

2. Examine an acquisition — Many of the fee-generating activities that have added incrementally to the industry’s profitability are now being restricted. Weaker financial institutions are deciding whether they can shoulder the challenges alone, presenting a potential M&A opportunity for their healthier competitors. M&A activity continues to be underwhelming, due in part to the continued uncertainty in the economic environment overall and sellers holding out for a recovery in pricing. However, there is capital available, including capital from private equity firms.

3. Implement smart tax strategies and structures — The bank’s transfer pricing policy, if applicable, should be reviewed (new rules have been finalized) to see if business changes have created opportunities to adjust policies.

See also  Credit Suisse rejects $515 million claim linked to fraudulent adviser

4. Develop new service offerings — Banks can no longer rely on old methods of making profits. Developing new services and maximizing the reach of existing services are essential.

5. Make technology work for you and your customers — In an effort to curb costs, some banks cut back on their IT expenditures, but this may have put them at a competitive disadvantage. The advent of online banking and the prolific use of apps have revolutionized how banks operate day-to-day and how they interact with their customers.

6. Send the right message with social media — Social media is a powerful communications vehicle with international reach. According to a recent survey more than 50% of respondents see corporate use of social media increasing significantly over the next 12 months. Yet more than 75% of respondent companies do not have a clearly defined social media policy.

Is your bank using social media wisely? For instance, Bank of America has Twitter handles for customer service and career opportunities. JPMorgan Chase uses Facebook for its Community Giving Program, in which participants can vote for local organizations to receive grants. Social media provides the opportunity for banks to demonstrate their commitment to corporate social responsibility and help regain confidence from their customers and the public after being largely maligned during the recession.

7. Ready your bank for risk — Risk management is already a part of most banks’ everyday business. Yet with constantly emerging and changing risks, how do you know your institution is prepared? Does the bank have a chief risk officer? Is the board actively involved in discussions regarding risk? Enterprise risk management (ERM) is an approach to assessing and addressing the full risk profile of the bank, including key strategic risks such as operational, financial, regulatory, credit and market risks.

See also  EBRD to extend a €15 million loan to UniCredit Leasing Serbia

8. Understand regulations — New regulations are constantly emerging. Banks cannot afford to get compliance wrong. However, regulation does not have to be a barrier to growth.

9. Plan for the worst-case scenario: Stress-testing — Does your bank have an answer for “What if?” Stress tests evaluate the extent of losses a bank would sustain in its major asset categories under a troubled economic scenario, along with the impact those losses would have on the bank’s revenue and capital adequacy.

10. Build a stronger foundation for mortgage lending — There are major reforms in mortgage-servicing operations to address problems in the processing of foreclosures and loan modifications, as well as failures in governance. Banks are required to correct deficiencies in their residential mortgage loan-servicing and foreclosure practices. Banks must balance mortgage reform compliance with re-growing this area of their business. If properly managed, a new or expanded mortgage banking effort could be very profitable.

The bottom line — Although the regulatory and economic environments present challenges for the banking industry, opportunities for growth are available for institutions with the strategy and risk management to pursue them in 2012 and beyond.

 

 

Leave a Reply