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IN THE PRESS
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"A Debate on Tactics as Savings Account Models Proliferate"
American Banker, | Tuesday, November 18, 2008 |
"When banks are designing reward programs, they need to make sure that they don't suffer from unintended consequences," said James McCormick, the president of First Manhattan Consulting Group in New York.
One danger lies in overselling the ease with which rewards can be obtained and leaving customers feeling misled, Mr. McCormick said.
"Banks enjoy a very precious position as the most trusted of financial service providers. They shouldn't undertake any actions that compromise that trust."
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"Amid Holding Company Rush, Discover Eyes Another Way "
American Banker , | Monday, November 17, 2008 |
According to First Manhattan Consulting Group, "direct" banking deposits in the United States have grown from about $65 billion in 2004 to $200 billion in 2007, or 35% to 60% per year, compared with 3% to 4% per year in total retail deposits.
James McCormick, the firm's president, said he would have expected the overall rate of growth in direct deposits to moderate if capital markets were not so fickle.
Normally, he said, institutions enter the market, ramp up quickly, and meet their funding needs. For example, a finance company with $30 billion of assets might target $6 billion in consumer deposits to change its funding mix.
"They price up at the higher end of the rate structure, and grow very rapidly for a while, because they're growing from a base of zero," he said. "When they get to $6 billion, they change their approach" because "they're only looking for growth in proportion to the growth rate" of the overall company.
But this year, "with the financial crisis and the concern over liquidity coming into play," that pattern has not determined the trend.
For those seeking deposits through the direct channel, Mr. McCormick said, "it is inappropriate to assume that direct banking is a total commodity," where a Web site, FDIC insurance, and a high interest rate is sufficient.
Effective call centers are also important, for example. "A lot of customers will explore options on the Internet but" want to ask someone on the phone basic questions before opening an account, Mr. McCormick said.
A fundamental question for companies is whether the costs of building a direct deposit-gathering platform, and the advertising and high rates needed to attract account holders, are less than those in wholesale markets, Mr. McCormick said.
"Before liquidity was so valuable, that calculation" would not justify a direct platform for those "that had access to wholesale funds and a strong debt rating," he said. But "at times like these, being short on liquidity is sometimes the end of the game."
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"U.S. Bancorp, Eyeing Bulked-Up Rivals, Ponders"
Wall St Journal, | November 12, 2008 |
U.S. Bancorp lacks presence in what are commonly considered some of the nation's most attractive -- and most competitive -- banking markets: the Northeast, the Southeast and Texas. Mr. Cecere said the company is "not bound by any particular geography" when it thinks about acquisitions.
That suits some observers fine. James M. McCormick, the president of First Manhattan Consulting Group, said, "We find no evidence between so-called attractive banking markets and total return to shareholders."
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"The Search for Innovation: Leadership in Turbulent Times"
BAI Banking Strategies, November/ December 2008, June-July 2008 |
James M. McCormick, president of First Manhattan Consulting Group, runs a firm that has conducted thousands of "mystery shops" and interviews with front-line employees at retail banks. He told the gathering that during their visits, his researchers always ask bank employees a simple question: "As a customer, why should I choose your bank over the competition?" And two-thirds of the time, McCormick noted, the employees have no answer to that question; they either say nothing or, in his words, "make something up on the fly."
The executives seemed uneasy, if unsurprised, by McCormick's report. I was stunned. How can any business expect to outperform the competition when its own employees can't explain — simply and convincingly — what makes them different from, and superior to, the competition?
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"The Fine Art of Cross-Selling"
BAI Banking Strategies, November/ December 2008 |
"The trick of it is finding the right customer and marrying them up with the right need proactively or letting them know you can take care of it," says Gordon Goetzmann, managing vice president at First Manhattan Consulting Group, a consulting firm in New York City. "It's guiding them to the right person to help them actually close that sale, whether it's a person in the branch, in the contact center or some other referral."
While matching customer needs with products "is pretty easy to do," Goetzmann adds, it's also "where most banks fall short. They hold cross-sell out there as the Holy Grail and as the means to an end."……….
More focused campaigns also make direct mail more effective. When a regional bank recently launched a direct-mail campaign covering all deposit products, it found that just focusing on a group with a higher average balance increased its response rate to 4%, up from 3%, according to First Manhattan. The difference was merely mailing to a customer group with an average balance of $12,000, rather than $10,000. |
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"Gauging Fee-Side Pricing Power as Industry's Top Consolidates"
American Banker, Friday, October 31, 2008 |
"In many geographies, smaller banks already are gaining share on larger ones, so that would seem to counter the notion that the big banks will be able to deploy a significant degree of pricing power," James McCormick, the president of First Manhattan Consulting Group of New York, said in an interview this week. "In a lot of markets, community banks still have a powerful position. … Overall, on the consumer side, banks smaller than the top 30 institutions still have about 50% of market share."
Mr. McCormick said his recent analysis of market trends shows that if bankers start "getting more aggressive on fees, you could end up shooting yourself in the foot by losing deposits."
He also said lawmakers are increasingly sensitive about any hidden or lofty fees that could be viewed as unfair.
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"Developing a Comprehensive Investment Decision Framework for Mortgages"counting & Financeune-July 2008 |
"How to identify opportunities in mortgage-related investments.
Comprehensive article by Emil Matsakh, Managing Vice President, Will Callender,
Managing Vice President and Ken Alverson, Vice President can
be obtained by
clicking here.
Bank Accounting & Finance
www.tax.cchgroup.com.
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"Can Banks Maintain Edge in Confidence Game"
American Banker , April 29, 2008 |
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"James M. McCormick,
the president of First Manhattan Consulting Group in New
York, said that on a scale of 1 to 10 (with 10 being "total
destruction of trust") the subprime and credit industry
crises impact on banks rates a 3, because most consumers
understand that it was nonbank financial industry employees
who "bent the rules." Still, Mr.
McCormick said, "If banks persist in becoming even more
aggressive in overdraft and other nuisance fees, they will
be putting their trusted positions at risk to a greater
degree than the mortgage phenomenon.
He believes that this is because the fees can make
consumers "really angry."
Mr. McCormick said many of
the banks that were the most aggressive in offering free
checking accounts have become the most aggressive in
charging overdraft and other fees.
"In
the early days of free checking, many were gaining share and
now many of those banks are losing share," he said." |
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"Can Banks Maintain Edge in Confidence Game"
American Banker , April 29, 2008 |
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"Robert M. Tetenbaum,
an executive vice president and the co-head of the marketing
services practice at First Manhattan Consulting Group, said
that a big reason consumers view banks differently is that
they look at their banks for different things. "It
all comes back to product," he said.
He explained that "When I'm giving an institution
money, imbedded in that is trust. When I'm asking for
a loan, my trust is hoping that they're going to give me a
fair deal."
Brokerage customers, by
contrast, trust that their firms will protect their
principal while providing a fair risk-reward return, Mr.
Tetenbaum said." |
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"On the Money Hunt: Pulling in Deposits; in Competitive
Times, Value Proposition and Execution Counts"
ABA Banking Journal, February, 2008 |
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"Deposit growth--checking accounts,
savings, money market funds, and CDs--has averaged from 5%
to 6% in most markets annually since 2000 with a few
dramatic blips up and down along the way, says Gordon J.
Goetzmann, managing vice-president, First Manhattan
Consulting Group, New York. On average, the typical
mid-sized bank relies on wholesale funding for 10% of its
balance sheet assets. Growth of core deposits is
generally tied to rate of inflation, net new formation of
households, and net business growth, Goetzmann points out,
making for regional variation." |
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"Branching Outlook: Cautious, Surgical, But Still Growth Key"
Cover Article - American Banker Retail Banking Supplement, January 15, 2008 |
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"James M. McCormick, the president of First Manhattan
Consulting Group, refers to this period as a time when small
banking companies made a bet that even though the Internet
had arrived, branches would still serve an important purpose
and were crucial to any bank's success. It was the opposite
of what large companies were doing: cutting back on branches
and focusing on online capabilities. "Banks now have enough
experience in how well they've done, and some are going to
say, 'Well, we tend to do this pretty well, and we tend to
get a good return on investment, so we're going to keep on
doing it,' " he said." |
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"Framing Payments Strategy Around the Checking Account"
BAI Banking Strategies, January/February 2008 |
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"Being All Things To All People Isn't So Profitable"
US Banker, December 1, 2007 |
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"Simple demographics would indicate that marketing to the
both people would be effective. But this method is just not
sophisticated enough, considering people's complexities
around managing money, says David Tetenbaum, the managing VP
at First Manhattan Consulting Group. "[Financial
Personalities] is very different than the conventional
approach, which has historically been demographically based
and is more of a blunt instrument," he says." |
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"Improving Risk Committees' Productivity and
Effectiveness"
Bankstocks.com, October 25, 2007 |
"We believe it’s possible to broadly define a generic
risk-management process that can be applied effectively to a
broad range of manageable risks. The overall approach is
based on the three following principles. First, top
management (not staff) should be the ones to drive the
process. Second, top management should require that support
materials be relevant and succinctly address all key risk
issues. Third, top management should ensure that prior
risk-management-related decisions are reviewed for
practicability and effectiveness……"
Entire article by Alden Toevs, EVP and Emil Matsakh,
Managing Vice President available on
www.bankstocks.com |
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"Revving Up Revenues"
US Banker Magazine, October 4, 2007 |
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“"When you're trying to get your sales force to behave in a
way that delivers more revenue, you have to give them
training, incentive systems and case studies, and the
what-to-say-in-this-situation help to make it work," says
Jim McCormick, president of First Manhattan Consulting
Group." |
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"Taking Expense Control to the Next Level"
BAI, October, 2007 |
"Banks need to go beyond typical head count reductions in
their drive to cut costs. Three areas to look at: shared
services functions, future investments and
compliance-related activities. The good news is that the
inverted yield curve won’t last forever. The bad news is
that even when the yield returns to “normal,” banks will
still find profitability under pressure."
Entire article by Gordon Goetzmann, EVP:
http://www.bai.org/bankingstrategies/2007-sep-oct/guest/ |
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"Winners in the Race for Same-Store Deposit Growth"
Bankstocks.com, September 20, 2007 |
"One metric stands out as being highly correlated to growth
in a bank’s shareholder value: same-store deposit growth.
Banks that consistently generate strong same-store deposit
growth in their mature branches tend to generate strong
growth in other relevant measures, as well, from overall
organic revenue growth, to earnings per share growth, to
total shareholder return. What’s more, the number is also a
good predictor of success in de novo branching."
Entire article by James McCormick, President available on
www.bankstocks.com |
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"Customer Service Is Best Interest for Banks”
Wall Street Journal, September 15, 2007 |
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"... James McCormick, president of First Manhattan
Consulting Group, which has sent employees into banks posing
as customers for years, says some banks offer new ways to
make switching easier than in the past." |
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"Branching Out"
Dallas Business Journal, August 2007 |
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"First Manhattan Consulting Group found that only 20% of
institutions that try to grow by adding branches were
consistently successful at it.
Building a brand new bank office is very different from
minding the store at a well established branch, said Gordon
Goetzmann, EVP . “It’s all hand on deck to bring in new
customers. The Banks that are the best at starting new
branches know what makes them different & are able to tell
potential customers about it” Unless you can succinctly
answer that question, you have potential problems.”
“What is different about Dallas-Fort Worth is the mix of
institutions opening new branches here, says Andrew Frisbie
of First Manhattan Consulting”- “you’ve got all kinds of
people – big banks, small banks entrenched players and new
entrants who are coming in here” Frisbie said." |
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"Bankers Discuss Efforts to Get More Share"
American Banker, July 24, 2007 |
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""Some banks have relabeled their private bank as a wealth
management unit," said Robert R. Vokes, a managing vice
president with First Manhattan Consulting Group, a New York
firm that serves financial services companies. "But if you
peel back, it's still a private bank. It's focused on
deposit and credit instruments."
Of the 110 million households in this country, 3% to 4%
own about 65% of all financial assets, said First
Manhattan's Mr. Vokes, and those households on average hold
more than $2 million. Another 30% of all financial assets
are held by about 42% of all households, he said, and they
hold about $100,000 to $2 million each. Though the first
group, truly affluent people, generate the biggest chunk of
business, competition for those individuals is fierce, Mr.
Vokes said.
The second group, often labeled mass affluent, is growing
rapidly and may offer an opportunity to more banks, he said.
Both are seeking advice, he and others said, though affluent
investors typically require considerably more specialized
and sophisticated information than others. In addition to
gaining knowledge about stocks and bonds, these investors
want help figuring out how to minimize income taxes, how to
transfer their savings to their offspring, and how to avoid
burdening their children if they need long-term care,
several executives said.
Mr. Vokes said the mass affluent want help with two
questions in particular: Does that person have enough money
to retire, and how much will that person be able to spend in
retirement?" |
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"M&A - BRANCH CLOSURES: Think About the Micromarket"
Retail Banker International, June 30, 2007 |
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…the latest study by US-based consultancy First Manhattan
Consulting Group (FMCG), Beating the Odds in Bank
Acquisitions: Avoiding Value Destruction in Branch
Consolidations, challenges many of the assumptions
surrounding bank mergers and questions whether, in many
cases, branch closures are a good idea at all.
By examining closely the economics of a number of bank deals
in recent years, FMCG took a detailed look at the impact of
consolidating and converting branches as part of its
in-market acquisitions. |
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"Viewpoint: Branch Consolidation Presents Challenges"
American Banker, June 29, 2007 |
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"An analysis our firm performed shows that the majority of
branch consolidations result in a negative net present
value, because customer attrition turns out to be much
higher than typically assumed.
Consequently, banks need to implement next-generation
approaches for selecting which branches to close, adopt the
techniques used by institutions that beat the odds with
higher retention, and integrate these perspectives into
their distribution planning.
The potential savings associated with consolidating
overlapping branch networks can be intoxicating. Such
figures are ubiquitous in in-market deal announcements and
are incorporated into valuations. However, focusing
exclusively on this aspect of the income statement can lead
to inappropriate decisions." ...Full Article by James
McCormick , President and Theo Moumtzidis, Managing Vice
President. |
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"The Big Question"
Retail Banker International , April 18, 2007 |
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"Direct banking: should banks play offence, defense or stay
on the sidelines? Jim McCormick and Gordon Goetzmann,
president and managing vice-president, respectively, of
First Manhattan Consulting Group, give their views on one of
the definitive trends to hit the retail banking market over
the past decade Could this 'disruptive' direct banking model
put 30 percent of banks' stock price at risk? What should
your strategy be as more competitors offer high rates via
this approach? The answer will be different depending on
your bank's situation." |
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"Pressure Seen on Web Deposit Efforts"
American Banker, March 23, 2007 |
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Gathering deposits through online channels is becoming more
popular, but First Manhattan Consulting Group says it is not
for all institutions.
James M. McCormick, the New York firm's president, and
two colleagues issued a white paper this week that concludes
banking companies following the pack and starting online
deposit accounts could face balance-sheet trouble if they
cannot generate loans quickly.
First Manhattan expects the companies already in the
business to start showing signs of that pressure.
"Some direct [banking] competitors will slow their
growth, because of limits on their ability to profitably
invest the high-rate deposits gathered," according to the
report. "We already have seen evidence of some players
'backing off' prior price leadership positions."
However, the temptation to start an online deposit
channel is high, because of its low overhead and the
difficult deposit-gathering environment. Mr. McCormick's
team estimates that 2.5% of all U.S. consumer and
small-business deposits are in online accounts.
"Direct banking may present the most serious threat to
retail banking incumbents in decades," according to FMCG |
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"Specialty Units Enhancing Some Banks' Earnings"
American Banker, March 9, 2007 |
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Theo Moumtzidis, a managing vice president at First
Manhattan Consulting Group in New York, said the
nontraditional products and services banks offer should fit
their overall business model.
For example, if a bank has built its brand on convenience
- branches open seven days a week until midnight and
call-center employees trained to provide immediate answers -
it should not add specialized insurance products that
front-line employees do not understand, he said.
"A bank has got to have a clear value proposition - the
best rates on bankrate.com or the most convenient branches -
and any additional products have got to support that value
proposition," Mr. Moumtzidis said. "If not, there will be a
big impact on additional service, because the bank is just
making things more complicated." |
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"Banks Struggle to Turn Satisfaction Into Sales"
Australian Financial Review, February 19, 2007 |
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Pretty well all the banks today subscribe to the mantra
"satisfied staff, satisfied customers, more sales" and the
importance of having precise goals.
Yet one of the interesting findings from First Manhattan
Consulting Group - ANZ's favourite consultant - is that
satisfied customers are not enough to generate sales.
Moreover, banks cannot build strategies, or even marketing
campaigns, around customer satisfaction.
Satisfied customers need to be a given but a bank's
products and services must be tangibly different . |
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"What is your 'Financial Personality'"
Bankrate.com, January 26, 2007 |
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Sometime this year, Experian -- the credit score folks --
and First Manhattan Consulting Group will roll out
"Financial Personlities," which they tout as "the industry's
first comprehensive segmentation and scoring system for
specific types of financial services, including credit card,
home equity and mortgage." This isn't going to be used to
evaluate you as a good or bad credit risk. It is so that
marketers can identify who's likely to take out a home
equity loan or a new credit card. |
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"Experian and First Manhattan Consulting Group Launch
Data Scoring Service"
Prism Insight, Novemer 28, 2006 |
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"Financial personality scores were developed to address the
absence of category-specific market segment scoring systems
that could meaningfully inform initiatives ranging from line
of business strategies to direct marketing campaigns," said
in a statement David Tetenbaum, managing vice president of
FMCG." |
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"Assessing Business Line M&A: ROE, Efficiency, and the
Core"
American Banker, November 27, 2006 |
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"Roundtable interview with Jim McCormick, Mark Fitzgibbon
dir of research for Sandler O'Neill, Andy Senchak, Pres Corp
finance KBW & John Chirin Head of Fin Institution M&A at JP
Morgan topic: business line M&A.
McCormick: Notwithstanding that, I get calls from bank
CEOs that say, "Come on in here, Jim. We need some work.
We've got to shift our business mix around to get our
efficiency ratio up." And the first thing I say to them is,
"Well, let me show you the analysis that suggests that this
infatuation with a low efficiency ratio is misguided."" |
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"Banks Can Fiddle With Closely Watched FDIC Deposit
Data"
Dow Jones News Service, November 21, 2006 |
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"Simply looking at the FDIC's data "massively" overstates
the big banks' New York retail presences, said James M.
McCormick, president of First Manhattan Consulting Group. He
thinks the problem has more to do with shoddy Wall Street
analysis of FDIC numbers than with banks that "intentionally
goose their data."" |
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"Business 24/7 Helps BofA Recommit to Small Biz"
US Banker Magazine, November 1, 2006 |
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"Remote-deposit capture is another tool that will become a
major lure for small businesses, says Gordon Goetzmann,
managing vp at First Manhattan Consulting Group.
Banks will likely make funds available sooner for
companies using remote deposit. He says that small and
mid-sized banks, in particular, already are easing their
funds-availability polices for small businesses.
Another service he expects to increase is
check-guarantee, where a business agrees to accept slightly
less than the face value of a check in return for the
guarantee that it will be honored at the bank, even if the
person who wrote the check doesn't have the funds in his
account."" |
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"ANZ Lure: Convenience"
Financial Review, October 30, 2006 |
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"McFarlane refers to research by what he terms- the best
banking consultancy in the world- that further convinces him
ANZ's strategy of concentrating on revenue generation while
investing in customer service is right.
The consultancy is First Manhattan Consulting Group,
whose research is summarized in two papers, "Drivers of bank
shareholder value and implications for top management's
agenda" and "Looking in the rear-view mirror? Focusing on
the wrong road signs?".
First Manhattan Consulting is also the alma mater of
ANZ's head of personal banking, Brian Hartzer, and personal
banking was the highlight of the ANZ result.
FMCG tested more than 50 variables to develop its maxims.
"Our analysis highlighted the importance of organic revenue
growth as a key differentiator," the consultancy found.
Moreover, in the sample of regional American banks
analysed - banks not dissimilar to full-service Australian
banks - a surprisingly wide variation in performance was
found.
"Our analysis implies that for regional franchise banks
the market values the ability to grow attractive revenue
organically more than any other driving characteristic,"
FMCG said. "Improvements to efficiency may be nice to have,
but there are limits."
A good measure, which ANZ has adopted, is the retailer's
favourite of same-store revenue growth.
"Retail franchise banking continues to be a business with
high return on equity and low risk," First Manhattan
Consulting said.
"We have noted in the past that even modest organic
growth in retail franchise banking can warrant an implied
price-earnings ratio of 20 per cent or more for this line of
business, given its favourable risk-versus-return
characteristics. Consequently, generating more business in
existing branches is highly valuable."" |
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"ANZ Has Plenty of Momentum"
Financial Review, October 27, 2006 |
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"First Manhattan Consulting's Gordon Goetzmann floored
McFarlane a few years back when he told him what he needed
to outperform was a strategy, to which he replied: "But
don't all banks have a strategy?" The answer was: "No, they
all do the same things and what you need is a tangible
reason for customers to want to come to you instead of the
others."" |
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"A Hipper Zion Says 'ilavayou' to Young People"
American Banker, October 17, 2006 |
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"Gordon J. Goetzmann, a managing vice president at First
Manhattan Consulting Group, said many banks hawk checking
accounts and credit cards on college campuses, but very few
take the time to understand Gen Y and develop a
comprehensive and targeted program like Zions'. Gen Y is
worth the effort, he said." |
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"Unsecured Lines: Worth the Risk"
Small Business Banking News, August 2006 |
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"Though it may be considered risky, the move by BofA is
actually a sensible decision, because it allows the bank to
lure deposit volume, said Theo Moumtzidis, a managing vice
president of New York based First Manhattan Consulting
Group.
“Up to a certain amount of money, lenders can make
decisions primarily based on borrower credit reports,
Moumtzidis said.
Although small business owners, as a population, tend to
be conservative and borrow infrequently, he said, it is a
lucrative segment for banks. “These types of (small
business) customer are attractive because of their
deposits”.
...............The available access to credit is a key
driver for a small business client when choosing a bank”,
Moumtzidis said. By offering this line of credit , which a
business can access or choose not to access without
incurring penalties, BofA is luring deposits. “It’s a foot
in the door” he said." |
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"In Focus: Avoiding Rate Competition Gets Harder"
American Banker, August 11, 2006 |
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"James M. McCormick, the president of First Manhattan
Consulting Group of New York, said that normally about 30%
of households are interest rate-sensitive but that these
days the percentage could be as high as 50% because of the
steep, rapid rise in rates on relatively short-term
certificates of deposit." |
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"Wanted: Deposit Specialists"
American Banker, August 9, 2006 |
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"Some in the industry worry that creating a separate
position to focus on deposits might promote "silo" thinking,
but Theo Moumtzidis, a managing vice president at First
Manhattan Consulting Group in New York, defended the
approach. He said more companies should designate someone to
pursue the "big untapped opportunity" in commercial
deposits.
"Traditionally, the commercial business is focused on
loan generation," he said. "It's no accident that you often
hear people who are commercial bankers actually call
themselves commercial lenders. Deposits are an
afterthought."
The deposit-gathering positions that are starting to pop
up at regional and community banks will help them bring in
business customers who might have been overlooked in the
past - those with cash on hand and no need for a loan, Mr.
Moumtzidis said.
"For commercial lenders, it's actually a big step for
them to go out and gather deposits. It's a different sales
process," he said. "People who are good at developing loan
demand might not be good at developing deposit demand."
"The reason why it's tougher to gather deposits is, in
the same time period, many banks got religion about the
importance of deposits," he said. "Now there are even banks
out there trying to buy deposits, offering $100 in cash for
someone to come and open an account."" |
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"Why the Jump in Big-Bank Fee Revenue?"
American Banker, August 7, 2006 |
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"James McCormick, the president of First Manhattan
Consulting Group, said gains from fee hikes "are offset by
higher attrition." Service charges have been falling since
2003 and are now back at levels last seen in 2000, Mr.
McCormick said. Banking companies would rather rely on cost
cuts than fees to make up for slow net interest income
growth, he said." |
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"Interest Rates Get Mixed Reviews"
The Patriot-News, August 6, 2006 |
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"There's no doubt that everyone's feeling the pressure right
now," said Gordon Goetzmann, a managing vice president at
First Manhattan Consulting Group, a financial-industry
consulting firm in New York City.
Banks could react by cutting expenses, such as for
marketing and travel, Goetzmann said. As competition
intensifies, banks also might have to sharpen service, which
is one way they can compete without having to offer the best
interest rates, he said." |
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"Facilities Tell Story of Merger Integration"
Banking Strategies Magazine, August 4, 2006 |
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"Gordon Goetzmann, co-leader of the retail practice for the
New York City-based First Manhattan Consulting Group, says
“better acquirers realize that you don’t get a lot of
meaningful lift [in revenues] from a significant
renovation,” except in some certain cases where you’re
expanding drive-through lanes or expanding parking for
customers." |
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"Where's The Innovation"
Banking Strategies Magazine, July / August 2006 |
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"When consultant James M. McCormick thinks about innovation
in banking, he thinks of distinctive service-oriented
business models that lead to improved revenue growth.
Cherry Hill, N.J.-based Commerce Bancorp, for example,
has extended its already extensive service hours and added
branch hours on Sundays in effort to live up to its motto of
being “America’s most convenient bank.” Once Commerce gets
customers in the door, it wants to bowl them over by
providing what it calls a “wow” level of service, which is
yet to be matched by many other players in retail banking,
says McCormick, president of First Manhattan Consulting
Group in New York City.
Commerce’s ground-breaking service approach is supported
by an extensive training program — the bank runs its own
“university” akin to those run by powerhouse retail brands
like Disney and McDonald’s. Commerce branches rely on an
open floor design, which allows for employees to more
quickly and easily make eye contact and then verbal contact
with customers, McCormick says.
Similarly, Seattle-based Washington Mutual Inc. has
stepped out of the box by earnestly cultivating an image as
the “anti-bank” bank in order to engage consumers
dissatisfied with conventional offerings, McCormick says.
These service-oriented advances align with the general
trend of moving from a growth strategy based on cutting
costs to one built on winning over new customers, McCormick
says. He adds that the select few banks that can use their
innovations — in design, training and product offerings — to
distinguish themselves based on the power of their service
are reaping the rewards in additional customers and
deposits." |
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"Citi Eyes Biggest Push Yet; Banking Giant Focused on
Branches, Takeover"
Crain's Chicago Business, June 26, 2006 |
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"'I don't see a lot of differentiation from any of these
banks,' says Gordon J. Goetzmann, co-head of the retail
banking practice at First Manhattan Consulting Group in New
York. 'They're all going after the same customers.'" |
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"Vernon Hill vs. The Curve (CommerceBancorp.) (Cover
Story)"
ABA Banking Journal, May 1, 2006 |
|
"Commerce resonates with the person who says, 'I want a bank
that cares about service and my needs as a consumer'," says
James McCormick, president, First Manhattan Consulting
Group, New York. The consultant says price sensitivity is
quite strong among about 30% of consumers, leaving many
prospects for the service-oriented bank." |
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"Strategy: Decentralized Banks Post Impressive Deposit
Growth"
American Banker, June 20, 2006 |
|
"Centralization has gradually become the prevalent model
thanks to factors including mergers, advancements in
technology, and management by product line, said James
McCormick, the president of First Manhattan Consulting, a
New York bank consulting firm. From mid-2002 to mid-2005,
Synovus' deposits grew at a compound annual rate of 8.4%,
and Cullen/ Frost's at 7.2%, more than double the top-150
average, according to FMCG. Mr. McCormick said that
theoretically, a bank of any size bank can use a
decentralized approach. The challenge is finding experienced
people committed to "the long-term role of being the banker
in the community" rather than climbing the corporate
ladder." |
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"Using Direct Marketing to Attract Deposits"
American Banker, May 16, 2006 |
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"Bankers are realizing that targeted mail containing
segment-specific language is effective in attracting
profitable deposit-rich accounts. Banks are now using this
technique to generate returns of more than 450% on their
investments. Banks of all sizes can purchase and quickly
deploy new third-party analytics and tested messages to
improve same-store deposit growth, a key driver of
shareholder value. In a study by my firm, annual growth in
shareholder returns averaged 26% from 1999 to 2005 for
regionals in the top 20% in same-store deposit growth - but
only 5% for those in the bottom 20%. The first group
increased same-store deposits 9% in the average year; the
other's were stagnant...... Full article by Robert M.
Tetenbaum"
|
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"Going Online for Savings"
New York Times, May 5, 2006 |
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""Obtaining a material amount of deposits requires being
near the top of the list of rates offered at any given
time," said James M. McCormick, president of the First
Manhattan Group, a banking consultancy." |
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"Toward a Better (and Better Selling) Call Center"
American Banker, March 28, 2006 |
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“Customers often have a bad time with call centers: They get
lost in the maze of automated menus. They linger on hold,
with no clue to how long they will wait. They are bounced
from agent to agent, waiting each time in the back of the
queue. They are asked to repeat information already
provided. They get wrong or conflicting answers. People who
call in because they are interested in opening an account -
sometimes with hundreds or thousands of dollars - also get
poor service. They get agents who cannot describe a
product's key features and sell its advantages. They are
transferred to a new-account team that is poorly staffed or
operates on a limited schedule. (In recent mystery shops,
over 50% of our calls to open an account were put on hold
for more than 10 minutes”....full article by Gordon J.
Goetzmann and Theo Moumtzidis |
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"FMCG on Banking: What Really Drives Shareholder Value"
Bankstocks.com, March 27, 2006 |
|
What strategy should a bank’s management follow to maximize
shareholder value? To find the answer to that question, we
recently looked at the valuations and shareholder returns of
a relatively homogenous subset of 100 regional banks
(excluding “processor” banks such as State Street and Mellon
and money center banks such as Citi and J.P. Morgan Chase),
and correlated that data to a slew of operating statistics,
ranging from efficiency ratios to fee income. In addition,
we divided the group into banks that have grown revenues and
earnings primarily through organic means (the “Organics”)
and those that have relied more on acquisitions (the “Acquisitives”).
When we were done with our analysis, we concluded that
shareholder value is driven primarily by a few performance
metrics, and that a key one is often not monitored regularly
by banks, nor tracked or analyzed by most industry analysts. |
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"Redefining Customer Service"
Bank Director Magazine, 4th Quarter 2005 |
|
The problem started when Linarducci inquired about an
account balance over the phone. The senior analyst and bank
mystery shopper with First Manhattan Consulting Group in New
York was “up-sold” on a new savings account that promised to
yield an impressive interest rate.The rep assured Linarducci
the transaction would only take “a few moments” to complete
and then unexpectedly transferred him to an offshore call
center, where he waited on hold for 25 minutes. The language
barrier made it impossible for Linarducci to be comfortable
enough to authorize the new account. “The second rep kept
referring to my money as rupees and I kept telling him
dollars,” he says. “Even though I corrected him, he kept
referring to the amount I was going to transfer as rupees,
not dollars. We were talking two different amounts.” |
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"Banks Keep Interest Rates Lofty"
Wall Street Journal, January 16, 2006 |
|
"I see the competition for deposits as being intense no
matter what the Fed does," says James McCormick, president
of First Manhattan Consulting Group, which specializes in
the financial-services industry. |
|
"Retail Strategies: Despite Losses, Banks Still Run
School Branches"
American Banker, December 13, 2005 |
|
Theo Moumtzidis, a vice president in the retail banking
practice of First Manhattan Consulting Group in New York,
said a school branch is not the only way to produce good
will through association with a local high school. Bankers
can sponsor athletic teams, speak about finances to students
on their way to college, or make bank space available for
school events such as car washes to raise money, Mr.
Moumtzidis said. |
|
"Case Study: Fast-Food Formula Inspires Integrity's
Drive-Thru Design"
American Banker, November 15, 2005 |
|
About 40% of a typical branch's customers use the
drive-through once a month, said Gordon Goetzmann, the
managing vice president of First Manhattan Consulting Group.
Most service complaints involve speed, Mr. Goetzmann said. |
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"Retail Success Drives Most Banks' Stock Price"
American Banker, November 15, 2005 |
|
"Five years ago FMCG suggested that the industry did not
respect retail franchise banking because it was seen as a
mature, commodity service with low growth prospects. But we
had an alternative view after calculating the service's
warranted-price-to-earnings ratio, based on modern finance
calculations, reflecting the business' high return on equity
and low risk. Since then some retail banks have invested in
improving their street-corner value proposition." |
|
"Redefining Customer Service"
Bank Director Magazine, 4th Quarter 2005 |
|
"Tell employees what is expected of them: While a clear
definition of their tasks is important, says Theo
Moumtzidis, vice president for First Manhattan Consulting
Group, he cautions against training people so that they are
too constrained by their roles. “Give them a certain level
of power, and trust them to solve problems.” Give people the
tools to succeed: First Manhattan Consulting Group execs say
one big mistake banks make is launching services and
products that even bank staffers have a difficult time
describing. If the bank staff can’t explain it, they won’t
be able to sell it." |
|
"Deposit Powerhouses Talk About Changing Tactics"
American Banker, November 8, 2005 |
|
"James M. McCormick, the president of First Manhattan
Consulting Group of New York, said his analysis of FDIC
deposit data for the 12 months that ended in June shows the
industrywide average same-store deposit growth was 3%-4%. He
said the "top-of-the-line players" are achieving growth of
10%-20% in mature branches, which he defines as those open
at least six years." |
|
"Thinking Locally At Citigroup"
Business Week, October 24, 2005 |
|
""Retail banking economics are overwhelmingly dominated by
deposits,'' says James M. McCormick, president of First
Manhattan Consulting Group in New York." |
|
"Customer Service Comeback Boosts Satisfaction Ratings"
American Banker, October 18, 2005 |
|
"The best banks have "good old-fashioned respect for you as
a customer nonstop," Mr. Goetzmann said. "You walk into a
branch and someone actually looks at you. Or they wave their
hand at you while they're on the telephone when you walk in.
Or a person at a desk stands up and greets you. "They are
happy to see you. They are respectful of your time. That's
what you expect in other retail businesses; in banking it's
no different. The last thing you want to do is wait."
Banking is a commodity business, he said, and banks can
differentiate themselves only through service - "people,
speed, and appreciation for the customer's business." "It's
all conveyed through people," Mr. Goetzmann said. |
|
"In Focus: Challenges Mount, and So Do Industry’s M&A
Expectations"
American Banker, October 14, 2005 |
|
When and if the floodgates open, bankers would probably find
themselves overpaying for lagging franchises, according to
James M. McCormick, the president of First Manhattan
Consulting Group. With business conditions forcing banks to
sell, due diligence is now more important than ever before,
he said. “In the world of acquisitions, it’s surprising that
not enough analysis is done to determine what the revenue
momentum is of the candidate,” said Mr. McCormick in a
recent interview after the release of his Oct. 7 white paper
“Shopping to Buy a Bank? Should Your Due Diligence Be More
Diligent?” ...... Mr. McCormick said acquirers typically
fail to achieve improvements in their efficiency ratios
after deals not because they don’t cut costs, but because
revenue sags. |
|
"FMCG on Banking: Shopping to Buy a Bank? Make Your Due
Diligence More Diligent!"
Bankstocks.com, September 29, 2005 |
|
"New FMCG analysis shows that a key reason many bank
acquisitions fall short of expectations is that buyers do
not uncover organic revenue growth problems at the seller.
Consequently, while agreeing to a deal price, the acquirer’s
management does not fully appreciate that they are
implicitly signing up for a heroic turnaround of an
underperforming institution." - James M. McCormick |
|
"Visa, MasterCard Grid for a Showdown"
Electronics Payments Week, September 27, 2005 |
|
If interchange starts being based on actual costs for
required functions, and they’re forced to go below 1
percent--and these are all ifs—you have to believe a number
of things will happen," says Andrew Dresner, vice president,
First Manhattan Consulting Group. |
|
"Complexity Debilitates the Frontline"
Banking Strategies Magazine, September / October 2005 |
|
"Corporate pursuit of “best practices” can proliferate
within an institution to the point that frontline staff
becomes over-burdened, confused and distracted. Bankers need
to diagnose and then rectify the problem." - Gordon
Goetzmann |
|
"From Their Home to Yours: How to Reach the Home-Based
Entrepreneur?"
Banking Strategies Magazine, October 2005 |
|
"There is an ample opportunity for banks with home-based
businesses,” says Gordon Goetzmann, managing vice president
for First Manhattan Consulting Group. “Many of the
businesses need help with better managing their cash, such
as separating out payments better for tax purposes, and
banks can do a lot to help them and develop strong
relationships along the way.” |
|
"Wachovia to Purchase Westcorp for $3.42 Billion"
Associated Press, September 12, 2005 |
|
''What you are seeing here is a number of banks looking to
step up their origination of higher-yielding loans,'' said
Gordon Goetzmann, of First Manhattan Consulting Group, which
advises banks. |
|
"Shifting the Risks May Head Off a Meltdown"
Financial Times, September 6, 2005 |
|
Richard Dorfman, a well regarded analyst of the GSEs at the
First Manhattan Consulting Group, says: "The OFHEO is coming
to the view that the competency of risk management at the
Enterprises has become quite satisfactory, even though the
report references the need to improve and elevate risk
management."
However, as Mr Dorfman says: "One form of risk management
begets another form of risk." |
|
"Tales of the Tape: Harbor Florida Bancshares Looks
Ripe"
DOW JONES NEWSWIRES, August 17, 2005 |
|
"The recipe that they're serving up in their branches is
resonating with folks," said Gordon Goetzmann, managing vice
president at First Manhattan Consulting Group, a management
consulting firm that serves financial institutions.
Goetzmann said Harbor Florida's branches, when compared
with competitors in the same zip codes, readily compete with
and beat larger rivals 80% of the time for new customers. He
said Florida's top 10 banks have lost 14 percentage points
of market share collectively to Harbor Florida and its peers
over the last six years. |
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