Most Important Strategy of Top-Performing Banks? Simplify

Thanks to rising interest rates, lower corporate taxes and easing of regulations, the prospects for higher bank profits are bright. The positive trends provide management teams with options regarding where and how to invest in their business, according to Capital Performance Group’s analysis of the banking industry’s 2017 financial performance.

Our research on the top-performing banks provides examples of management teams that demonstrated an ability to manage the noise and focus on the most important drivers of success for their institutions:

  • Some of the standouts purposefully shrank or completely exited lines of business to focus on core activities. Residential mortgage lending was a common pain point this year.
  • Serving particular customer segments continued to work well for others.
  • Driving efficiency helped propel others to success. Continued trimming of the branch network was a profitable strategy for FCB Financial Holdings and Western Alliance and, notably, they still maintain healthy core deposit growth.

Ultimately focus remains the most important strategic imperative for high-performing banks. So, what management characteristics lead to clarity in strategic focus?

  • They know what they want. They set clear financial and strategic targets to be achieved. In turn, these targets provide the framework for prioritizing the initiatives to be pursued and the others that should be postponed or dismissed completely.
  • They are data-savvy. They use data accurately and objectively to identify the handful of opportunities that will help the bank attain strategic targets. They then use data again to determine the best options for pursuing those opportunities.
  • They understand what they do well. The high performers recognize what strengths they can leverage and build on. They know which segments they serve well. In short, they see where they can win.
  • They communicate better. A sharp strategic focus and a well-conceived plan are important. However, both must be clearly and consistently communicated throughout the organization to ensure unity of direction. It’s no accident that the best leaders are also the best communicators.
  • They act fast. None of the above matters if the institution takes too long to implement and execute. In today’s world, the timeline for action is becoming shorter and shorter.

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