As Competitors Retreat, Opportunists Gain Market Share
NEW ORLEANS -- Many financial institutions are cutting back on branch hours and other services to save on expenses. For others, it's an opportunity to gain market share, industry consultant Bill Goedken told those who attended his best practices-themed breakout session at the CUNA CFO Council conference May 18.
In addition to his consulting business, the Colorado-based Goedken serves on a bank board, and said his CAMEL 1 institution has expanded drive-thru hours in some locations and increased net worth to position themselves for the future.
"Some institutions are retreating, but others are moving full steam ahead," he said.
Credit unions are experimenting with leasing small spaces for mini-branches, rather than buying or constructing larger locations. Strip malls offer some great deals these days, Goedken said, especially if a credit union can find an appropriate space, like an end unit that has potential for a drive-thru.
He shared one credit union's circle the wagons strategy of opening three leased-space branches to compete with just one new bank branch.
"From experience, the CEO knows one will be barely profitable or unprofitable, one will go gangbusters, and one will be in between," he said. "The busy location is where you would establish a permanent branch."
One audience member offered that failed banks can be a good source of cheap branch space. His credit union has purchased two such locations, one for 30 cents on the dollar and another for just $100,000.
Financial service providers are also increasingly co-branding branch space, partnering with Starbucks or a dry cleaner, so members can take care of two errands with just one stop.
"I believe future of credit unions and banks will be to touch members' lifestyles more than their money," he said.
However, Goedken cautioned his audience to choose co-branding partners wisely, because if the business fails or suffers a scandal, the institution's image could be damaged as a result.
Best practices branch strategies are also trending toward locations on access roads, rather than on high-visibility corner lots at busy intersections. Often drivers must enter those properties using access roads anyway, he said.
Strategic planning and execution may seem like a no-brainer, but Goedken quoted a study that found 30% of the average manager's time was spent on compliance and regulatory issues and only 5% on strategic planning.
This year, the most popular subjects that have come up during credit union strategic planning meetings Goedken has moderated include how to take advantage big bank fumbles, defining the credit union brand promise, revenue generation and cost control.
Strategic planning is particularly important for credit unions, because Goedken said he thinks the not-for-profits will pay a 40 to 45 basis-point assessment for many years, including costs to increase NCUSIF net worth above current benchmarks.
Additionally, loan losses are unlikely to return to prerecession levels but rather "settle somewhere in between," he said. Consumers have experienced a lasting attitude shift, in which strategic foreclosure has become a new standard for some.