In this episode of the Believe in Banking podcast, Gina and Juliet discuss opportunities and optimism in the banking industry. Following years of retail closures and predictions about the death of the branch, the reality in 2024 is that not only is the bank branch not dead, but in just the last year, the U.S. added more net new branches for the first time in a decade. Branches are just one of the ways banks are seizing opportunities for growth, but there are many reasons for optimism in banking. Positive economic news, good business prospects and an improved rate environment have buoyed banking this year. Nearly 9 out of 10 Americans with a bank account report they’re ‘very satisfied’ or ‘satisfied’ with their primary bank and the rate environment is improving prospects for banks and consumers, alike. On the opportunity front, M&A continues to drive momentum in the banking sector, with expectations high for continued expansion, both in the short- and long-term. From ways that consumers engage with banking brands and in branches, Gina and Juliet have a lively conversation about the rich opportunities for financial institutions, especially for community banks and credit unions who are priming their organizations for growth.
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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.
Gina Bleedorn (00:18): Welcome to our podcast for Believe in Banking. I’m Gina Bleedorn, President and CEO of Adrenaline.
Juliet D’Ambrosio (00:25): And I’m Juliet D’Ambrosio, Chief Experience Officer at Adrenaline.
So, Gina, last month we talked a lot about Future Branches and the trends that we’re seeing from a branch network perspective. We looked wide, and we looked very specific at the macro trends that we’re seeing both from the chases of the world, but also from smaller community financial institutions –banks and credit unions – that are looking at their branch networks in new ways. And a lot of what was interesting about that conversation was a sense of real optimism and belief in the branch network. And I think it’s so ironic, because if you had just traced the headlines and we actually went back and looked from 2019, but even before that, headline after headline [stated that] the retail apocalypse is upon us, the “bank branch apocalypse isn’t far behind,” and that was from Forbes in 2019. Forbes in 2019 also went so far as to say, “The bank branch is dead.”
“Bank execs predict the branch model will be dead in the next five years,” and that was from FINRA in 2020. “Covid killed the branch of the future” and Forbes reported that in 2020, as well. The idea that U.S. bank branch closures was a fait accompli; we were already in it. What is so interesting as we look in 2024 is that not only is the bank branch not dead, but in 2023, just last year, U.S. banks added more net new branches for the first time in a decade. That was reported by really every business publication on Earth, but including Yahoo Finance in just April of this year. And you mentioned the last time we spoke some of the other big banks that have come out with a renewed focus on their branch network. Talk a little bit about those, some that are our clients and not, and what we’re seeing, and why there are so many reasons for optimism.
Gina Bleedorn (02:39): There is really a great paradox, and it’s why there’s so much conflicting reporting because branches are closing, but they’re also opening, to the stat that you just mentioned. They’re rightsizing. So, banks and credit unions of all sizes are opening in new areas where there’s opportunity and they’re reconciling in legacy markets – markets that are oversaturated, markets where they have too many locations or locations in the wrong places. So, they’re shrinking, but also net growing. Then conversely with consumers, they want digital and physical. They want digital for transactions and physical for problem resolution, advice and interaction. Therein lies a bit of a juxtaposition. Further, physical channels are expensive. They are by and large the biggest line item on any balance sheet, but they’re also the greatest opportunity. That’s where the optimism lies – where the opportunity sits and opportunity right now with this optimism that has really just surged since a post Covid stabilization.
No one knew what was going to happen after Covid with really anything, especially with the physical channel. Then it stabilized. Now, we see where the future’s headed, and now there is incredible momentum to reconcile and skate where the puck is going. And especially in physical, you have to do that even faster because change takes so much time. Unlike digital change, you can’t push out a branch update like you can push out an app update. But all that said, all of the trends and opportunity right now is moving towards wanting to not only engage with physical channels, but also engage with the brands of banks. People want brands that are meaningful and both of those two things engaging in your brand and engaging in your branches spell opportunity especially for community institutions who cannot compete with the scale of the national banks.
Juliet D’Ambrosio (05:04): What’s interesting to me, as I think about what you just said around that idea that there’s optimism for branch opportunity, optimism for brand opportunity, there’s optimism sort of all around, and I think it’s a little bit unexpected. But the sun is shining on banking. Who knew midway through the year in 2024 that we’ve had just some big bursts of positive economic news, good business prospects? There’s an improved rate environment and banking’s having a bit of a moment. Just going back to some research that is driving this, we know that business optimism for mid-size businesses soared to nearly 70%. And the key growth indicators are at a six year high. Umpqua Bank just reported on that. We know that bankers generally, and this is true about the conversations that we have, and also just taking a step back and looking at the research, they’re upbeat about loan demand through the remainder of 2024.
Business lending is very solid, even amid some rate increases. And we’re not the only ones that are surprised. ABA’s Chief Economist said, “If you went back a year or longer, every economist out there including the Fed, we’re forecasting we’d be in a recession by now. But we haven’t seen that.” And thinking about it, not just from the banking lens but also from consumer lens. We always track Edelman’s Trust Barometer, which once a year, Edelman really weighs consumer trust and optimism across every industry sector. And what we saw this year is that financial services are one of the very few industries that have had a significant bump in trust, not just in America, but globally.
Consumers look at the banking sector with a great deal of belief and trust, and, in fact, they’re happy generally speaking with their banking experience. Almost 90% of Americans that have a bank account report that they’re either very satisfied or satisfied with their bank. 96% say that their banks CX or their customer service is excellent. And there’s just a sense that banking is getting it right despite those headlines that we mentioned before, “Banking, what’s that?” All consumers want something entirely different. The role of banking as a pillar of trust, of stability, and you used that word stabilization, that idea of stability, of credibility, of advice continues to not only bolster the industry but actually buoy it. It’s becoming stronger and stronger.
And I’m interested… You’ve been doing this a long time, Gina, you’ve been working with the financial services industry for a couple of decades. Can you remember a time of this type of optimism or really what do you think is at work here?
Gina Bleedorn (08:16): I think this started pre covid, but Covid just accelerated it and not Covid itself, but the result of Covid and the new normal that we have all settled into. And then I think the mini crisis, as we call it from Q1 of last year, about a few failures and, “Oh my gosh, is this all happening again? Oh wait, it’s not.” Actually we have incredible safety and soundness across 99% of the banking sector in this country. Now even the latest Fed report did a stress test with 31 of the top banks and financial organizations. Every single one of them can withstand a severe downturn if that were to happen in the form of a recession. We’ve never been that strong.
So really starting with the crisis in 2008 and then the mini crisis, I think we’ve come out stronger and we know what we really want, which is for financial institutions in this country to make people better and stronger. And that’s the premise of why we believe in banking. But I think the culmination of all of those events has led to this really renowned and unprecedented optimism that we see today.
Juliet D’Ambrosio (09:52): Gina, I just had a little mini epiphany as you were talking and tracing back this optimism. We talked last month about this. We actually covered the topic of Gen Z and The Future of Finance in great detail in a white paper that we published earlier this year. It’s available on our website. But what has us scratching our heads is this idea that younger generations, Gen Z particularly, look at banking with fresh eyes and with a sense of real need for banking in their lives to provide the kind of direction and advice financially that they’re just not getting other places.
And the epiphany is that it might be because of those successive crises that you mentioned that were formative probably to Gen Z as they were growing up, that they read the headlines, they saw their parents likely be affected by or maybe struggle through some of these crises. And then they of course experienced Covid at a very tender time of their coming of age, their financial coming of age. And they also saw how the banking industry rose to meet the moment in those times. And so this idea that they have invested that trust because they rode the rollercoaster of those crises and saw how banking really became something to believe in.
Gina Bleedorn (11:25): I love that, Juliet, and they want to believe. They’re searching for purpose. They’re searching for better. And they see better in banking than their grandparents. They have those fresh eyes.
Juliet D’Ambrosio (11:37): Well, what’s also interesting looking not just from the lens of the consumer, but the lens of the industry overall, and this is something that we track very regularly at adrenaline is M&A. We know that in 2023 there was a fairly significant slowdown in M&A. What is also unexpected and surprising is that M&A activity in financial services, despite the regulatory challenges, is in fact on the rise both from a deal value standpoint, but also pure volume. Not only is it on the rise in 2024, but this is a long-term trend that we are seeing play out. I’d love for you to talk a little bit about what we are seeing from a trend standpoint, from M&A and what we expect to see and what really community financial institutions should be thinking about.
Gina Bleedorn (12:36): The M&A landscape picking up represents change generally and hopefully change in a good way because with M&A, you must change. And so that is endemic of the general disruption of the status quo that all of the trends that we’ve been talking about are causing. And the good result of M&A if it’s done well with a positive integration, and that is largely doing right by employees but also by customers, is that you have a scaled up organization that can better serve their customers and their communities. And that is not fighting for irrelevance, and that is making sure that the top three national banks don’t just completely dominate. So, we support M&A generally. M&A is good for all. So there is the good in it. And it’s also forcing what we talked about earlier with the idea of the brand recognition and attention and also the branch recognition and attention, but there is a very real business need driving this M&A.
It’s not just bank CEOs sitting around saying we want to change because they don’t necessarily innately [want change]. But they must because they have to scale to compete. The regulatory environment is driving it largely more than anything. But also with that, the competitive environment, the encroachment of fintechs, and just the need for operational scale to remain relevant even digitally, not to mention with physical infrastructure. So, all of that is driving the need to scale.
And one trend that is definitely real and newer is credit unions M&A-ing, and I just made that up. I think you can say M&A-ing… Credit unions are not only, they’re M&A-ing in two ways, one with other credit unions so far more frequently now we are seeing merger of equals or substantive size mergers and acquisitions between credit unions that previously wouldn’t happen largely because of just M&A deals are difficult, especially when you don’t have shareholders that can get a payout from the deal and make the pain go away if you will. It was harder to reconcile that. And I think that’s one of the reasons why credit union mergers have been slow.
They are now happening because of all the pressure to scale that we’ve been talking about. And so this is really good for the credit union industry. There is also the shift that we’ve spoken about on a previous podcast in April about credit unions buying banks, and we had the king of credit union M&A. Michael Bell, who is the leading M&A attorney for the industry in doing these credit union buying bank deals. And so that inherently is something that has some risk for the credit unions. They’re trying to figure out new business models – get into commercial, get into wealth, get into new markets – and that’s why they’re doing it. But it is also a way that they are scaling.
So, all of that said, the predictions are showing a 25% industry consolidation expected by 2030, which is much faster than the clip it has been going previously, especially in 2023. We just had a major slowdown largely because of economic and regulatory uncertainty. All signs look like that is it is already picking up and it is going to begin to pick up very significantly over the coming years.
Juliet D’Ambrosio (16:28): Yeah – almost 50% – 47% of all financial services CEOs are actually planning to acquire in the next three years, and that was reported by EY. 35% of community financial institutions CEOs with assets that are under $5 billion plan to either merge or acquire in 2024. So, that idea of incredible consolidation in a more accelerated way, Gina, that you just mentioned, we are actually seeing the data bear that out. It’s also an interesting dynamic to see that both consolidation M&A is picking up, but also the idea of organic growth and how optimism both fuels that organic growth, but also becomes… there’s a need for that growth.
As Jack Welch says, it’s one of our sort of words to live by or phrases to live by: “Change before you have to.” I think we have some great examples even from in the last few years of our clients, our community credit union and banking clients, that have rebranded not as a result of M&A, but to help propel that organic growth forward. Talk to me a little bit about that.
Gina Bleedorn (17:56): And Juliet, we talked a bit about the credit unions, but an example of organic growth. There is a bank, one of the oldest banks in the country, the oldest in Virginia, Burke & Herbert Bank. They are privately held and had never done an acquisition, had never even done things that differently than they had in the 170 years of their existence. They had an opportunity to really grow just in an adjacent market in Richmond. They were already in Alexandria with the brand they already had, but the brand itself hadn’t been refreshed or made modern in about 100 years, so they began as a brand and branch rejuvenation. Then they had an opportunity for a merger of equals that was just finalized a couple of months ago with Summit Community Bank out of West Virginia. And now just like that, they’ve doubled in size, but the proactive move to reinvent themselves was pivotal for that M&A then to be successful.
And now the combined entity will take on the name and the new built-for-bigger brand that Burke & Herbert had created prior to the merger. So setting up for growth in any way even organically can help, merger or not, that’s a brand new story that’s not even on our website yet, but one that is a brand that just launched for an amazing Louisiana based community bank, the new Bonvenu. This is a wonderful story about optimism, growth, brand value, and doubling down where they are to be bigger organically. And Juliet, you led the strategy and creation of this amazing brand. Talk to me about Bonvenu.
Juliet D’Ambrosio (20:01): I’m so happy that you asked because all brands that we work with become ultimately a labor of love. And what I mean by that is that there is no financial institution with whom we work, that we don’t ultimately believe in their promise, their individual promise. And it was very easy with what had been Citizens Bank of Louisiana, which as you might imagine, there are a couple of the “citizens” banking platforms in Louisiana. And in fact, as this community organization was growing, they had been in Shreveport and Bosier City – a real pillar of the community for 40 years. Not only did the name become limiting to their growth as they looked to expand throughout Louisiana, their ambition is to be what they call “Louisiana’s Community Bank,” but even in their own backyard.
And in fact their CEO, Jason Smith, tells a great story about how he would have customers, long-term customers of the bank come and congratulate him for a new bank branch that was built two blocks away from their existing branch that was the “Citizens Bank of Shreveport,” for example. So customers didn’t even know the difference between these banking brands. Citizens knew that growth was an imperative, but they also believed in Louisiana as a real market of opportunity. We worked with them to create a brand that highlighted, celebrated, and really brought to the forefront their Louisiana roots.
Another great quote from Jason is that “Even if you wanted to, you couldn’t power wash the Louisiana off of us.” And in fact, with Bonvenu Bank, their brand and all the ways that it comes to life, we not only didn’t try to power wash the Louisiana off, but we dug deeply into those roots. And so the name Bonvenu, first of all is a bit of a mashup. It is sort of a made up word, but it has roots in real words. And so it’s a combination of bon, which is the French word for good, and bienvenu, which is the French phrase for welcome, which as you put those together, the literal translation means good welcome.
And that really is emblematic of their entire relationship-first approach that everyone who walks into their branch, who has a conversation with them, who sees them out in the community, feels this sense of good welcome, that they offer. Another part that was key to their rebrand, not only their name, their identity, which is a crown. It’s hard to talk about logos in a way. Sometimes it’s easier just to see them, but it is a crown and a bridge inspired by both of those, speaking about Louisiana’s and especially Shreveport, which is right on the Red River. This innate connection to water and to building bridges into the future, but also the part of Louisiana where they are located is considered the crown of Louisiana.
But the most celebratory part of their Louisiana heritage wasn’t just the name, it really came to life in their positioning and their tagline and their tagline is “Built to Be Here.” And I think that that is so beautifully articulating the sense that they believe in Shreveport, in Bosier City, in New Orleans Parish, in Metairie. They believe in the promise of Louisiana and they’re not going anywhere. They are going to be there to build those relationships and to always be there for their customers. And this idea of seeing Louisiana embracing the future that it offers their customer’s own vision and helping at the same time to differentiate them from all the other citizens and other community banks with something that is ownable and that could only be by, for and about the communities they serve.
It’s really is a reflection of the optimism that we have been talking about at the brand level. And of course, the brand is translated now throughout their branches. We love to see it and we’re seeing more of it.
Gina Bleedorn (24:58): What a beautiful story of pride in self, pride in place, pride in who you are as a bank and making that emanate outward. That is emblematic of the optimism that we’ve been discussing this entire episode. So, thank you for that. Well, that’s why we’re here because we believe in optimism and we believe in banking.
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 believeinbanking.com.