In 2012, many banks demonstrated that it was entirely possible to generate solid earnings performance in a low-rate, low-growth environment. In part one of our three-part analysis of bank earnings performance for the ABA Banking Journal, we identify the strategies that helped the largest banks (those with assets of $10 billion or greater) succeed. Our top 15 banks and thrifts (10 publicly traded; 5 privately owned) achieved their ranking by:
Riding the mortgage refinancing wave: The median net loan growth among the top ten was 8.86%, compared to net loan growth of 6.45% for all other institutions. U.S. Bancorp (#3), First Republic Bank (#4), and Wells Fargo & Co. (#5) all made repeat appearances at the top thanks to the continued refinancing of residential mortgages.
Non-traditional acquisitions: Two of our top ten steered clear of whole-bank or even branch acquisitions, and focused on hiring loan officers and teams of bankers from their competition to spur organic growth. Texas Capital’s (#1) hefty investment in human capital was responsible for a 20.8% increase in salary and benefits expense in 2012, and also largely responsible for its 30.4% net loan growth.
Payments and product development: Noninterest income accounted for 38.3% of Commerce Bancshares of Kansas City’s total 2012 revenue. The most significant contributor to fee revenues was the banks trust company, boasting 7.23% growth in revenues due to the expansion of the sales force and marketing, and investments in new product development. Product development was not limited to its trust subsidiary. To augment its merchant services, the bank introduced ROAMpay (similar to Square) in 2012, along with a suite of products for healthcare companies.
Some of the strategies banks relied on in 2012 are likely to prove more elusive in 2013, but management teams at top-performing banks find ways to deliver.
The full article, rankings, and analysis can be found at www.ababj.com.