Increasing Banking’s Influence Through Scale

From mergers and acquisitions to branching into new markets, banking’s major focus post-pandemic is on growth. In this episode, Sean and Gina discuss this desire for scale amidst great uncertainty. With M&A activity hitting its highest levels since 2007, deals are happening all around, but it’s not just big banks competing for dominance. Community banks and credit unions are looking at expansion through acquisition. But we’re also seeing mergers of equals, banks buying or partnering with fintechs, fintechs buying or partnering with banks, and niche and large technology enablers leveraging their specialties in new and novel ways. Find out how – especially for smaller and midsized financial institutions – it’s more important than ever to implement strategies that help community banks serve more and serve better.

Text Transcript

Intro: This is Believe in Banking, a podcast series for decision-makers, influencers, and leaders, featuring experts taking on the financial industry’s most pressing issues with insight and empathy. The podcast features information and conversations designed to enlighten and empower. Here are your Believe in Banking hosts, Sean Keathley and Gina Bleedorn.

Sean Keathley: Welcome to our Believe in Banking podcast. I am Sean Keathley, President and CEO of Adrenaline.

Gina Bleedorn: And I’m Gina Bleedorn, Chief Experience Officer at Adrenaline.

Sean Keathley: Gina, maybe we’ll start first just thinking about the merger and acquisition activity. I’ve been talking to several bank CEOs, and it is clear there is one key thing on the mind of bankers this year. More than one, but one for sure is growth, without a doubt.

Sean Keathley: We have had so many clients and other banks that we know of or in the acquisition mode, and those that aren’t, when I talk to them many are in their plans. And if they’re not in their plans they’re absolutely looking to branch into growth markets with new branches.

Sean Keathley: So I think that idea of growth is really on people’s mind. We have talked in this podcast before, all the benefits of scale. Looking for talent, often community banks maybe don’t have the talent they need, the changing environment which the pandemic did in terms of movement patterns or where people live, work, and go to school is different.

Sean Keathley: And looking for opportunity often means merging or acquiring institutions or branching into them. One of the big trends we were seeing in a macro level is there was a trend where European banks were shedding their assets in the US. We saw that with PNC, acquiring BBVA, a Spanish bank that had branches here.

Sean Keathley: There’s a lot of reasons that’s happening, but certainly it’s an opportunity for a bank like PNC to expand their footprint. And then Paris owned Bank of the West has just sold to Bank of Montreal, which triggers another big trend we’re seeing. And that is the Canadian based banks looking at the US for opportunity. You go from 30 million people to 330 million people, it’s the little pond and you’re going into the big pond.

Sean Keathley: And that’s highlighted again by another deal we just saw, which is TD Bank taking over First Horizon. First Horizon, before selling to TD, had acquired Capital Bank, Iberia Bank. So you can see that many are scaling to win, some are scaling to be attractive to sell, but there is definitely activity picking back up that is nearing pre-pandemic numbers.

Sean Keathley: Gina, you were able to attend, Acquire or be Acquired in Arizona recently. Why don’t you talk a little bit about what you were hearing from those sessions, talking to bankers, and talking to the investment banks and attorneys that were in attendance?

Gina Bleedorn: Yeah, Acquire or be Acquired put on by Bank Director has been going on for quite some time, and really is a top notch mecca for the heart of what is happening with M&A’s. Focused a little more around banks, but also credit unions, fintechs. And the landscape of M&A is not just exploding, it’s changing. The M&A activity in general is back, it’s actually in 2021 hit the highest levels since 2007.

Gina Bleedorn: So certainly some pent-up things from being frozen during the pandemic have made a surge happen, but I think there is truly this desire for scale amidst great, great uncertainty. And the biggest uncertainty is coming from the fintech disruption. So not only is scale happening, merger of equals are happening, but banks buying or partnering with fintechs, fintechs buying or partnering with banks, niche tech enablers and large tech enablers getting in the mix in different ways.

Gina Bleedorn: So there is a great convergence of different types of financial entities, almost redefining what financial services is and what it looks like. And so traditional banks and credit unions, or what we know today as financial institutions, have a lot of opportunity to capitalize on change, but also some risk if they are not looking to what change is happening and how to make moves to position themselves well amidst that change,

Sean Keathley: We have highlighted some of the larger mergers and acquisitions that really make the headlines, they impact more branch locations, more communities. We are involved in the Truist project, the brand reveal is happening now. So you’re seeing BB&T and SunTrust signage disappear as we speak, and the Truist brand is coming alive. And really one of the biggest deals that’s ever been done and the next closest was Wachovia Wells Fargo.

Sean Keathley: But that’s not really the full story, because in terms of numbers, there are a much higher number of acquisitions happening at institutions that don’t have that kind of scale. We’re thinking about the regional banks, the community banks, and even the credit unions. And as we know, there’s a far bigger number of those institutions, so the likelihood of those being acquisition-driven make it higher just in that sheer fact.

Sean Keathley: But you could also argue that maybe it’s even more important when I talk about the need to scale. The smaller your organization, the more difficult it is to survive and thrive.

Sean Keathley: And many still have the spirit of community bank and absolutely want to be community-focused, neighborhood focused, but that can be done in more than one community and often that provides many benefits. And to put it into numbers, in a recent report one in four banks, including all sizes, is very likely to have a merger or acquisition in 2022. That’s really pretty astonishing, when you say 25% of banks are planning to grow, that’s the kind of trend we’re talking about.

Sean Keathley: So Gina with a trend this prolific and this many organizations, large banks, community banks, regional banks, credit unions, dig into the why a little bit. Why are so many people thinking of this as a way to expand and grow?

Gina Bleedorn: Yeah, the top reason is not shocking. It is expanding the geographic footprint, and that supports everything we’ve been talking about about the power of physical presence. Even if there’s less people going in it’s expensive, and the branches that you have may not be optimally designed and bigger than you need.

Gina Bleedorn: The geographic presence is the number one reason why M&A’s are happening. Now that is followed by looking for new business lines, new revenue sources, often more niche revenue sources. So there is certainly a move towards becoming specialized in a few different ways, but those are the two main reasons why it’s happening.

Gina Bleedorn: Further, we mentioned this before along those lines, that is why even non-banks are coming into the mix. And there is this bringing together of players that weren’t used to playing with each other before. That also includes, and this is quite a polarizing topic, but credit unions buying banks, that is absolutely happening. And that presents a whole new level of convergence, both in the credit union communities, in the bank communities, and in the minds of consumers.

Gina Bleedorn: That ultimately what often happens in the M&A world as deals are being looked at and considered and getting done, the downstream ramifications of the experience for the customers and for the communities and for your own staff become a secondary, and sometimes even in some ways overlooked.

Gina Bleedorn: And so what we want to help our clients and the financial community think about is what are those implications of how this deal is going to affect our customers, our staff, and our potential customers in the markets that we may be expanding into. And we may need to change certain things about ourselves, about our brands, about our branches as we expand.

Sean Keathley: Well, they’re excellent points, Gina, and as we just remind everyone that are listeners, thinking about just the idea of the spirit of this podcast and why we started it, Believe in Banking. It’s not just about really growth, but it’s around serving those communities. It’s about following the people, giving them access to advice, learnings, building futures for their families. And this need for financial literacy, because I think that’s something else that’s plaguing the country.

Sean Keathley: The rich have gotten richer, the stock market is rolling along and the average American is still facing headwinds. And so this notion of community-focused organizations or just organizations in general, they could also… It’s yes and really focus on financial literacy, and training people.

Sean Keathley: And there’s a financial brand article that talked about 63% of adults are worried about their finances, that’s a big number. That has to be coupled with the idea of growth, that commitment to move into a new geographic area and raise your flag. And hopefully even maybe in many cases have bankers that live in those communities and represent those communities, and really serve those communities. That’s extremely important intended of all this as well.

Gina Bleedorn: There is some data that has come out that’s not necessarily shocking, but is eyeopening in how significant it is regarding the gap between what banks and credit unions think they’re delivering as far as experience and what customers actually think, and consumers actually think.

Gina Bleedorn: And in fact, there was a Harris poll, it was highlighted in the financial brand, a report about gaps in customer experience, that found there is a 25% gap between marketers who say they’re doing an excellent job delivering an exceptional customer experience versus consumers who actually agree with that.

Gina Bleedorn: And in fact, over half of consumers, 55% say they feel unseen. 48% say they feel undervalued by the brands that they interact with. So that is a great eye opening opportunity to pay more attention to the end-users that matter for your bank or credit union to grow.

Gina Bleedorn: Ultimately, there is great opportunity here to not be afraid of this data, but to lean into what this data means to really find out what the opportunities are for you to know more about your customers. And build from there to make better experiences for them, because ultimately they are who matters as you are trying to grow and extend your business and serve them.

Gina Bleedorn: In fact, our managing director of strategy just spoke about this very thing at a CUNA Conference, the credit union national Association’s conference, about how to futureproof your brand by truly being aware of the experience your customers are having with you.

Sean Keathley: And as we’ve talked about, serving communities, bankers mirroring their communities, people trusting, believing in their banker to give them real advice. I think that’s incredibly important to retain as you scale, as you go into new markets, as you merge or acquire institutions and branch into new neighborhoods. You need to make sure that what makes you special and what makes you successful remains as you scale your organization and extend that into new neighborhoods.

Sean Keathley: This sounds like something that Park would say, but you can’t grow out of what made you successful. You need to be successful at scale.

Gina Bleedorn: Sometimes that may even require rethinking what you stand for if you make enough acquisitions or a big enough acquisition where you’re actually needing to assimilate truly and integrate and unify multiple cultures together, multiple promises together, that might be different even though culture is certainly looked at at least to some degree in the deal-making process. Making sure that that’s reconciled, rectified, and delivered in a consistent way at the point of experience with customers.

Gina Bleedorn: Digitally and in person, even more importantly is of the most importance to making sure the end experience for customers is that whatever changes took place, this is not just okay but I’m even better for it than I was before. That’s what will get you lifelong advocacy,

Sean Keathley: I almost like that as a challenge too, to continue to deliver as you scale.

Outro: You’ve been listening to Believe in Banking, a podcast series created to empower decision-makers, influencers, and industry leaders in financial services. Be sure to also join us on our flagship site,