The commercial banking market has been challenging, with intense competition from both banks and other financial companies. While rates have risen, margins have actually compressed across the market.
So how are the best banks achieving revenue growth and risk-adjusted relationship profitability? Through a host of winning tactics that enable bankers to outperform their peers in volume growth, interest income, fee generation and cross-sell. Join us as we discuss the state of the market and delve into the approaches employed by sales leaders and relationship managers to rise above the pack.
Speaker 1: As you folks know, we sit on a tremendous amount of data. We've got over 200 banks on our platform, and we see a lot in terms of the commercial loan market as well as the ancillary business.
Before I share with you what we're seeing, I'd like to get a read on what you folks are seeing or what you're expecting in the market. By a show of hands, how many folks here think that CNI loan volume growth in 2019 will be better than it was in 2018? How many people? Okay, one optimist. Great. All right. How many folks here expect that your own bank's loan portfolio will grow faster than the broader market? Many more hands. Okay.
In other words, you all are expecting to take a larger piece of a shrinking pie. That's a great strategy here. All right. Good news is that you folks are not that different from what your counterparts are saying.
I want to start by just sharing some of the high level points that we're seeing as we look out in the market. Obviously, right now, we're in an environment where the yield curve has really flattened out, signs of economic weakness. We're coming to the end of a very long expansion, and the sentiment out there is that GDP will slow down. All of the leading indicators of loan demand will start to turn the other way. It's going to create a very challenging environment in terms of loan growth.
When we talk to bankers about what they're expecting that their own bank will do from a credit perspective, a real contrast between what people were saying in the fourth quarter of last year versus what they're saying today. In the fourth quarter of last year, the market sentiment, first of all, was still that loan demand was going to be challenging, but what bankers were saying is that they were expecting pricing to compress. They were expecting credit structure to actually weaken a bit.
We're hearing the opposite now. What the credit folks at least are saying is that they're actually expecting a bit more of a tightening, and I think that coincides with the sentiment that the economic expansion is winding down.
How many folks here in the room are expecting your bank to start tightening up on structure or raising pricing? Just a few folks. Therein lies the disconnect that we're seeing. You talk to some of the credit folks, and they're saying, "Yeah, pricing's going to go up," and, "Structure is going to tighten." Then you speak to the line folks, and they're still trying to grow the portfolio. The incentives are still out there around production. In the data, we're also not really seeing what people are telling us we should be seeing.
We're still seeing a lot of compression in terms of pricing. We're not yet seeing any tightening around structure. A little bit here and there, and I'll show you where we are seeing some changes, but, for the most part, still a very competitive landscape.
Spread erosion is still happening across much of the market. We are seeing some pockets where pricing actually is getting a little bit better. What we're seeing is on smaller fixed rate deals, margins are widening. On smaller prime base deals, margins are improving. On larger credits, they're still flat to down.
The one bright spot is fees. Fees are actually improving in the market. We're seeing a higher incidence of fees. That's helping to offset some of the erosion around spreads, and that really does bode well for banks.
Then, cross sell is really key. One of the things that we see in the market, especially nowadays with pricing being so competitive, you really need to have the full share of wallet or a significant share of wallet to achieve profitability, right? The loans are being used as a loss leader, and it's becoming more and more important for banks to be able to really capture that ancillary business and to be able to track that business to make sure that it actually does materialize.
How many of you have bankers where they get a deal approved based on the promise of other fee-based business? Then it's a challenge to go back and see if that business actually does materialize. That's really key, is having that full feedback loop, having that accountability to make sure that the business does materialize.
Then I will share with you some best practices, some tactics that we're seeing from many of you folks, some of your other counterparts out there in the market, some tactics for winning in a highly competitive landscape. Hopefully some good takeaways there that you all can use.
All right. Let's start with some market trends. This is a look at the yield curve, and this is the gap between the ten-year and the three-month treasury. You can see how, just over the last couple of months, we've actually gone to a fairly flat yield curve. It actually inverted to some extent here, which again does not bode well for the strength of the economy.
Here we're looking at a couple of the key indicators that typically do serve as a leading predictor of loan demand. The left-hand chart is looking at GDP growth. The right-hand chart is looking at unemployment. Those solid bars are the actuals, the shaded bars are the forecast. This is very much what you folks are feeling, looking ahead. We're not quite in a recession, or that's not on the horizon for the immediate future, but you can see that downward trend in terms of GDP and the upward trend in terms of unemployment. Not too positive from the standpoint of loan demand.
Here's what actual loan growth look like through the end of last year. Here we're looking at CNI loan growth on the left. This is just quarter-over-quarter change. Then the right-hand chart is looking at commercial real estate growth.
There you can see, especially on the CNI side, we had a really significant late year rally. The numbers were pretty weak through the third quarter. Fourth quarter picked up fairly dramatically. A lot of folks were really optimistic at that point, thinking that 2019 is going to be a stellar year. I know some of the folks in this room were quoted as having predicted that, that 2019 would be strong, and yet you folks that I just surveyed said you don'
Commercial real estate market has been weak. We've been at about 2% or so, quarter over quarter, so no real recovery in that segment the way we had seen in CNI. The question is, will this continue?
To answer that, here we're looking at monthly CNI and CRE loan volumes. This is the H8 data. There you can see that, although the numbers were strong through year end, the first couple of months of this year have really flattened out. Already we're seeing that weakness in terms of loan demand.
All right. What's the expectation that's out there? Here we're looking at the fed survey of commercial banks, and that's split out between CNI, large firms versus small firms, and commercial real estate deals. I know it's hard to distinguish the different lines there, but the takeaway is, all the numbers are below the zero line. The expectation is that loan demand will actually continue to weaken.
All right. From a conservatism standpoint, this is a real sea change from what we reported just a couple of months ago. When we took a look at the fourth quarter 2018 survey, the question that was asked was, "Is your bank expecting to tighten credit?"
In the fourth quarter of '18, the numbers were all below the zero line. In other words, people were actually expecting an easing of credit. Now, in the latest first quarter survey, the numbers are starting to trend up again. At least the credit folks are saying that the expectation now with the economy weakening is that banks are going to start to tighten up on credit. We have yet to see this in the data.
Really, though, the one area that we have seen banks start to pull back is on the construction side. This is a look at quarter-over-quarter growth in construction volume. Here you can see that, this is through the fourth quarter of '18, the numbers did turn negative. This is really probably the one pocket that we have seen banks start to pull back, even through last year.
All right. Let's talk about pricing. This is a look at the pricing action that banks are taking on their renewals in cases where there was no change in credit quality whatsoever. These are deals that were done through February of '19, and what it shows is that both on the smaller deals, which are on the left, and the larger deals, when those deals are repriced, they're overwhelmingly repriced lower. That's another indication banks are actually cutting pricing, not raising pricing in today's environment.
How many folks in this room think that this is representative of your bank? Do you folks feel like you're doing that? Okay, yeah.
What's interesting … We did a webinar recently on this topic, and before sharing these results, we asked the folks that were on the line, "How often do you revisit the pricing on your renewals?" Actually, "If you have a downgrade, how often would you reprice those deals upward?" 90% of the folks said, "If it was downgraded, we would reprice it upward."
The data showed only 10% of the downgrades were repriced upward. People were very optimistic. More likely, it'll actually be repriced down. These are with no change in risk. Downgrades are not quite this bad, but still, that's an indication of the direction of pricing in the market, a real disconnect from what the fed survey said.
All right. What are we seeing in the actual data? Here we're looking at pricing trends on floating rate deals. This is through the first quarter of '19. These lines represent different deal sizes. The left-hand chart is looking at LIBOR-based deals. The right-hand chart is prime-based deals. That orange line, which is really the only one where you see an increase in pricing, those are the smallest prime-based credits.
The only one place that we're now seeing pricing start to trend north is on the smallest, and you might say, the highest risk transactions. Elsewhere, we're still seeing compression across the market, especially for the larger deals.
Little bit of a better story on the fixed rate side. Through the end of last year, the theme had been that banks were not raising rates on their fixed-rate credits quite as fast as their internal funding costs were going up. What we were seeing was … Here the blue line up top is the nominal rate on on-balance sheet, fixed-rate loans. The orange line shows FTP. That's the cost of funds. What you could see is that, as the cost of funds was climbing over the past several quarters, the increase in nominal rates charged to borrowers wasn't rising fast enough to keep pace with that rise in FTP.
Some bankers were saying, "It's sticker shock. Is this really hard to get our bankers to start to charge rates with a six handle when they'd been doing fours and fives for so long?" Other folks were saying it's just the competitive landscape. But, since the start of the year, we've actually seen nominal rates continue to climb, whereas with the flattening yield curve, the cost of funds has actually come down a bit. That's widening that premium that's spread over cost to funds.
The difference here between end of last year and end of the first quarter is 55 basis points. But, again, those are going to be the smaller transactions. Most of the larger deals, if they're fixed rate, are more likely to be done on the swap basis.
What are bankers expecting in terms of spreads? Again, this was based on the fed survey. The question was asked, "Is your bank going to be raising pricing?" Again, through the end of the fourth quarter, so the second to the last price point here, was actually very, very negative. Everyone was saying they were expecting to cut pricing. Now, in the latest survey, the numbers are starting to turn the other way.
Again, we're not really seeing that, but I think if you take a step back and you say, "Okay, the economy is weakening. Risk is getting a little bit worse," what does your bank going to do? Of course you're going to say, "Yeah, we're going to raise pricing." That's what people are saying. They're not really doing it.
How many folks here are actually seeing better pricing on your commercial loans in 2019? Okay, a couple of folks. Very few, though.
All right. Not withstanding those aggregate trends, when we look at the data, we see a tremendous amount of variance from one local market to another. This is a look at our data. These are just LIBOR-based deals. What we're looking at is average LIBOR spreads, state by state, across the country. Here we've just shaded the states. The darker ones have somewhat richer pricing, lighter ones have lower pricing. This is based on the borrower location, not the bank location.
We just see a tremendous amount of variance. Then if you take any individual state and you drill down to the local market, you see even more variance. Some of the major metropolitan areas have much lower pricing than some of the rural markets. Some of that's bank composition, some of it's competition, but really dramatic differences in pricing.
Who here thinks that you're in the most competitive market out there? Okay, most of you. We tend to hear that a lot.
All right. Now, on the bright side, we are seeing some improvement in fees. Here we're looking at the incidences of fees in the market. This is how often fees are assessed. We've broken this out by product, looking at real estate deals, term loans, and lines of credit. The takeaway here is that, across products, fee incidence is actually improving. We're seeing more fees being assessed. The level's not necessarily changing so much, but the incidence is getting better.
I think really what's happening is that a lot of banks recognizing the margin erosion that they're experiencing are trying to put more focus on fees. They're trying to raise awareness of the fee opportunities, start to get RMs to have those conversations. Finding not quite as much competitive pressure around fees as they're experiencing in terms of margins, so this is helping to mitigate the revenue loss from the declining spreads.
All right. Now, the real question. What's the potential for cross sell? Obviously the loan is not going to do it on its own in terms of achieving overall profitability. The real question becomes, what's the potential for either deposits or TM business or other ancillary business? Here we're looking at actual numbers. These are the average deposit balances that customers have based on the borrower size. Those blue bars show just the average deposits, and then those orange diamonds show deposits as a percentage of total loan exposure.
Obviously in the smaller end of the market, deposits are really important. They can be very impactful in terms of reducing your funding costs, increasing them. This data becomes really important, especially as you're evaluating potential opportunities.
In a lot of cases, what we see is that RMs will have a tendency to bet on the come. They may promise the world in terms of getting deposits to move over, but if those deposits are not real, if similar borrowers don't have deposits of that size, you may want to take a look at this data and perhaps question them. Say, "Is that really achievable, or is it not?"
Let's maybe now switch things to a little bit more of a positive note and talk about what some banks are doing really well.
When we look at the data, what we see is, not withstanding these market averages, we see a tremendous amount of variance, even within one individual bank, by RM. This chart is looking at one bank, who will remain nameless. The horizontal axis is the probability of default. That's the bank's own risk rating system. Then the vertical axis is spread. You would think that, the higher the risk, the higher the spread, and you'd have a nice curve, right? It doesn't quite work that way. Each of these dots represents a different banker.
What we're seeing in the data is one institution, with the same competitive advantages, you've got some RMs that are actually lower pricing for a higher level of risk than their colleagues are getting on better quality deals. This is the case across every bank that we look at, and it's because there are differences in the skills, and the talent, and the talking points across these different RMs.
There are some RMs that have a tendency to automatically lead with credit. If the bank down the street is underpricing the deal, they just try to go out and match that pricing. They may come to you folks and say, "I need approval for this low price because so-and-so bank is offering that price."
Whereas there are other bankers which will say, "Well, you know what? They may be offering a low price, but we do a lot of things better than that bank. Maybe our products and services are better. Maybe we can turn things around more quickly than that other bank. Maybe we have a value proposition that they can't match. Maybe we're the incumbent bank and there's a cost to switching banks." There are lots of things that those bankers do differently that get to better pricing. Maybe they're delivering a more tailored solution.
As [Carl 00:18:51] was talking about in the last session when he was talking about amplifying the human, what do humans do really well? They can deliver creative ideas. They approach the situation with empathy and trust, and really serve as a trusted advisor. Those are all things that RMs can do, and those RMs get paid for it.
Another area that we see some real best practices emerge is when we look at how bankers price spreads versus fees. How many of you expect that, if you charge a little bit more on the spread, you would give it up on the fee? How many of you think that you do that, your bank does that? A few of you, okay.
I've been told that for many years, that if we're going to ask for a fee, we have to give it up on the spread. The data says quite the opposite. What the data says is that the RMs that do better on the spread also do better on the fee. It runs counter to what most people think.
What these charts are showing, these are four different banks, and the bars are showing the spread that was achieved on those deals. The darker bar are deals with fees, and the lighter bar are deals without fees. What it shows is that, across these banks, and we see that really across all banks that we look at, the deals that have fees actually get a higher spread than the deals without fees. It's not the all-in spread including the fee impact, it's just the margins, just the coupon.
Those orange diamonds represent the risk. That's the expected loss on those deals. A lot of people might say, "Well, yeah, we get a fee, we get a higher spread because those are higher risk deals." That's actually not the case. What we see in the data is that the deals with fees and with those higher margins, if anything, are better quality deals. You've got some RMs that are winning good quality deals, they're getting great spreads, and they're also getting fees. Some real best practices embedded in these numbers, which I'll share with you in a minute.
Speaker 2: [inaudible 00:21:00]
Speaker 1: Let's just grab a microphone here. Hold on.
Speaker 2: You said that was RM based. Is it typical just to the RM, or could it be the industry to which they're lending? Is any of it specific to the type of loans they're doing?
Speaker 1: We tend to find the same dynamic even if we normalize for industry. But, that said, what we do tend to find in general is that whenever a bank has a specialty in a particular industry segment in which we can normally pick up as an industry vertical, so if they're organized around industry verticals, we typically find that the bank gets higher pricing as a whole in that industry than in the broader portfolio. The reason for that, and if you really think about it, it comes down to some of the same best practices that we see in the more generalist portfolio.
It's that, if you've got an industry vertical, your bankers know the market. They take that knowledge to really deliver value back to the customer. What they do is they understand the dynamics. First of all, they can make referrals, introductions, they can add value in those ways. But, they also understand the nuances of those industries and can take that data to say, "Well, how can we craft something maybe a little bit out of the box? Instead of simply just trying to compete on price and structure and offer the exact same product as the competitor does, what can we do differently? How can we bring our knowledge to bear?"
In the more generalist, more of what people might consider bread-and-butter middle market, some RMs simulate that. There's some banks out here that are in this room, as a matter of fact, who actually simulate that as well for the more generalist portfolio. Guiding the RMs to say, "You may not have an industry expertise, but how can we help coach you to ask the right questions to offer up the right products and services for borrowers in that industry?"
Other comments or questions? Okay. All right.
This is another example of some of the best practices that we see. Really, as long as I've been in banking, banks have told me that credit pricing doesn't exist in a vacuum, and that you price your credit based on the size of the relationship. One of the early analyses that I did with the bank, I just looked at the credit and I showed them, "You've got some loans below market and some above market." They said, "Well, of course we do. I bet you those deals that are below market are our best relationships, and the ones that are above market are weakest relationships, all else equal." We said, "Okay, let's take a look at that."
The bank gave us all their noncredit data, and we took a look at relationship profitability. What we found was the exact opposite of what they told us we should find. We found that the lowest priced credits actually were the ones that didn't have the cross sell, and the deals that had the deepest relationships, the most lucrative non-credit relationships, had the highest credit pricing. It was the exact opposite of what people intuitively thought we should find.
The reason, when they start to look at the names, they started to say, "Oh, well, of course. That relationship, they're not going anywhere. They do all their business with us. They're not even shopping the credit." Whereas the smaller non-credit relationships, or maybe the credit-only accounts, were places that the bank had to use price as their loss last leader to potentially win the ancillary business. Yet, they didn't have the feedback loop to make sure that that business materialized. They didn't have a mechanism to track delivery to promise.
We see that here. These are four different banks. We see this for many, many more banks, but for space considerations, we just showed four. Our left-hand bar, the darker one, shows relationships where the TM revenue is above average relative to the borrower size. Then the right hand bar, the lighter one, shows the below-average non-credit relationship.
Consistently across these four banks, it's the below-average TM relationships that have comparatively lower credit pricing. There are these best practices embedded in here, that you've got some RMs at are able to win the cross sell, they also negotiate great credit pricing, and then other folks that give up on all fronts.
One of the other differences that we see, and we see this across banks, we see it across individual RMs within a bank, is this tendency to reprice the credits. What we're looking at here is the performance of four banks. These are just the downgraded credit. I mentioned earlier, as you know, in the overall market, we're only seeing about 10% of downgrades getting repriced.
Here are four different banks. The chart is showing the percentage of these downgrades that had been repriced. These first two banks have a very high incidence of repricing, so they're repricing a majority of their downgraded renewals. The right-hand two banks are very rarely repricing their downgrades. What's interesting, the thing that stood out to us when we looked at these numbers, is that the banks that have had the most success at repricing are the ones that kept that increase really modest, at 25 basis points or less.
Embedded in here is a real best practice, that bankers can actually achieve success in repricing their deals, assuming of course that the pricing is out of line with the risk and it's out of line with the market, if they keep those increases modest. This is something that we see even when we look at an individual bank's portfolio. We'll see that there are some bankers that do a really good job of repricing their renewals, other people that don't. This seems to be one of the keys to that, is, if you go out there, even if you're a hundred basis points below market, you ask for 50, you're just inviting your customer to shop the credit. Keep it at a quarter point or less, there is a cost of switching banks, and you can achieve success.
I'd like to talk about some of the best practices that we see in the market. The first one is being more proactive in finding solutions to business challenges. It's not about pushing product. When we look at the data and we see that some bankers do a lot better than others, we routinely talk to those bankers. We ask them, "Tell us about some of these recent wins."
That's been one of the themes, is that these bankers will actually not talk to the customer about product, they talk about their business challenges. They talk about what is keeping the customer up at night. "what can we do to help solve those problems?" It's all about finding solutions to challenges. A lot of cases, the customer may not even have thought about what they might need in terms of banking solutions to these problems.
I'll give you one quick example. There was a bank where this borrower was trying to grow by acquisition. Every time that they found a potential target, there was a restaurant franchise company, they had to go back to their incumbent bank, run through all the financials to get approval for the deal. All this banker did was said, "You know what? We can just structure an acquisition line for you. We'll just put in place this acquisition line, and as long as the proforma financials fit within certain parameters that we define, you've got a deal, and here's the price." That allowed the customer to be so much more nimble in negotiating these deals with his borrower, or with his potential target, rather.
Being more proactive and not waiting for the customer to approach you. Looking for an RFP, but actually being proactive in figuring out solutions to business challenges is is a real competitive advantage. Something that, in the mid-corporate, large corporate space, that's in their DNA. In the middle market and business banking space, people tend not to do that as much.
Certainty of execution and quicker turnaround. This seems to be a real important competitive advantage. A lot of RMs will tell us that price and structure will win the business, but if you talk to borrowers, sometimes it's all about how quickly you can get them an answer or how quickly you can get to closing. That's part of what digital transformation is all about, just tightening up that turnaround time. One bank that we work with is going through an effort right now, and they're hoping to shave weeks off of the closing process, really to get a competitive advantage. That's an important differentiator.
The third best practice, focusing in on deposit generation in order to lower funding costs and improve them. One of the key tactics there in doing that is looking at … When you're spreading the financials, you've got access to all of this data, the customer's liquidity data. Taking that information, looking at what your bank has, and the gap becomes your sales pipeline. Taking that data, using that to proactively go out to customers.
How many folks here in the room actually do that today? A couple of you, okay. It's a great tactic for generating deposits, implementing grid-based pricing. Performance-based pricing is virtually standard in the large corporate market, and really upper end of middle market.
How many folks here do grid-based pricing for middle market deals? Okay, a few of you.
What we've seen is that, when you offer a pricing grid, customers tend to be very optimistic about their future financial performance. They focus in on the low point in the grid. We've seen cases where a banker can go to a customer with a higher initial price than what that customer may be seeing from a competitor bank, just by virtue of offering them a way down. Usually if you put a grid out there in front of a customer on day one, they don't really argue with that.
It's more, down the road, you don't have a grid, now they've downgraded, it's really tough to have a conversation about adjusting pricing. But if you have a grid, it's just automatic. You don't even have to have a renegotiation. You don't even have to wait for maturity. It's just going to automatically bump up.
The key with those grids, though, is to make sure that whatever the financial metric is that you're using is tied to the same covenant tests that you're running anyway, so you're not creating an additional process burden for the customer. That's an important tactic.
Placing greater emphasis on fee growth. One of the areas that we've seen fees really improve for certain banks is event-based fees. Sometimes it's tough to go out and ask for an origination fee. If you go out to a customer and say, "We're going to charge you a half point," that feels like a negotiable item. But if you say, "You know what? We're going to charge you $500 for documentation," typically they don't even question it, especially if you keep it at an odd number. "It's 495 for documentation." Or if you say, "Okay, you want this modification, it's going to be 25 basis points for the modification." That doesn't get questioned, because it's tied to an event. It's tied to something very specific and tangible that was either requested by the customer or triggered by the customer. Again, standard in large corporate market, not so common in the lower end of the bilateral space.
Taking a more proactive approach to managing your renewal portfolio. There are some banks that we work with where renewals comprise a good 75% of the total opportunity, and yet those deals are just rubber stamped. What we'll tend to find, whether risk is unchanged or there's a downgrade, a lot of banks really don't have a process in place to adjust pricing on renewals, or they don't know how to have a conversation with their customer.
For those of you that are using PrecisionLender, that's something that we can actually surface for you within the application. We can show you that, "Here's a deal that was originated three years ago. When it originated, the risk rating was two notches better, and the pricing was exactly the same as it is today." Giving your bankers a little bit more ammunition to go back and have that conversation with the borrower.
Explaining the pricing rationale, but not being defensive. There have been a lot of cases where we've seen an RM be successful at repricing a renewal, and said, "Well, how did you explain this to the customer?" In a lot of cases, the banker said, "Well, I just proposed it, and they didn't push back." Just didn't go overboard in terms of the discussion. Said, "Here's the term. Great news, got your renewal done. By the way, here's the price." A lot of cases, just be transparent, don't go overboard.
In other cases, bankers are telling us that it really helps when they can explain the rationale to the customer. If you've got a customer where, let's say their costs are sensitive to, say, the cost of raw materials, they know that, if the cost of raw materials goes up, they're going to immediately pass that back along to their customer. There's some rationale there in terms of costs. As bankers, we have a tendency to almost come across like we just pulled a number out of thin air. We say, "Your price is 250 over LIBOR," or, "It's prime flat," or whatever the number is. By seeming so arbitrary, it makes it really hard to avoid that tendency to negotiate.
When you explain the rationale and you say, "Well, given that you want this deal for three years versus five years, given your financials, given all of these different parameters, your price is going to be X."
By the way, if you make X a nonstandard increment, which is to the next point, it comes across as that much more thoughtful and more scientific. Think about it. When you get your Uber, it's always an odd number. You know intuitively, "That price is based on the availability of cars. It's based on the time of day. It's based on where I'm going." Certainly, maybe that doesn't change, but there are a lot of variables out there that impact the price. You just accept, "Okay, that's probably a fair price, given where we are today."
It's the same thing with your loan. You offers a nonstandard increment. Say, "You know what?" Instead of saying 250, it's 253. People will question it less, I guarantee you that.
Hold bankers as well as other product partners accountable by tracking delivery to promise. That's, again, something that, for those of you that are on the PrecisionLender platform, we do help with that. There's a dashboard. How many of you here have seen that dashboard, or use it? Perfect, about half of you, a little less than half of you. I would encourage you folks to take a look at that.
It's not really just holding your RMs accountable, it's also holding your customers accountable. If your customer promised to move some business over, have your RMs use that data to have that conversation with the customer. Or maybe they got to lead and pass it off to the treasury partner. Have them use that data to go and follow up with those individuals to see what's happened to that business. If that business doesn't materialize, that becomes ammunition in the next renewal cycle, to have that conversation again with the borrower about repricing the credit.
Maybe it's, "Yeah, we under-priced this deal. Gave you a great price last year because we talked about moving your deposits over. That hasn't happened, and so you've got, really, two options. We can either adjust your pricing, or we can get those deposits moved over now."
How many of you folks are actually doing that? Taking that data, using that to go back to the customer to try to get a strategy in place to move those deposits over? Okay, just a couple of you.
Then, finally, keeping abreast of market conditions. Obviously the market is very competitive. There's a tendency out there for bankers to overreact in some cases to the last irrational bid that they saw. "This bank down the street is offering a point less than we're offering," and then they automatically try to match that point.
Knowing where the market is, not just the average, but the range of pricing out there … That's, again, something that we can absolutely help with within the application. If you've got a banker that's maybe inclined to drastically underprice a deal, and their pricing at a level where the majority of deals in the market are above, then we can surface that information.
Some of you may have seen this within the market insights demo. We can say, "You know what? 75% of similar deals in your geography and your industry, of this same level of risk and this same size, are priced in north of this level." Helping to nudge your bankers to try to get a little bit more, but doing so with the confidence of knowing this is market.