The Daily Dividend: Industry News

News, notes and insights from around the industry

DECEMBER 12, 2018
The New CFO
By Mark Loehrke, Editor, Financial Managers Society

The New CFOThat the CFO role has been undergoing massive changes in terms of responsibilities and expectations over the past several years is hardly news to those currently occupying that spot. Ongoing change is just part of the day-to-day reality for today’s CFOs – a fact driven home yet again in the latest global survey from McKinsey & Company.    

Among the notable findings to emerge since the company’s previous poll two years ago, CFOs say the number of functions reporting to them has risen from about four to more than six – including big increases in areas such as internal audit, corporate strategy, product pricing, board engagement and enterprise transformation – and the share of CFOs overseeing their companies’ digital activities has roughly doubled (neither of these developments will come as surprising to many FMS member CFOs, of course).     

While the pace of change and the increasing demands on their time may be stressful, McKinsey prefers to take an optimistic view of the evolution of the role, noting that the current environment offers an opportunity for CFOs to present themselves as both leading change agents and sources of competitive advantage for their organizations like never before. The question, then, is how to best reach that goal by balancing their traditional (and still very necessary) tasks with the collaboration and talents that the new definition of the role now requires. 

Need some ideas? Make plans to attend the FMS webinar 2019 CFO Outlook: Insights and Recommendations for Financial Institutions on February 6, 2019.

DECEMBER 11, 2018
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

The results are in, and the NCUA reports that the third quarter was a rousing success for credit unions nationwide. For the period ending September 30, the 5,436 federally insured credit unions celebrated rising assets, falling delinquency rates and increases in membership.

Total assets rose by 5.6%, or $77 billion, from the year before, to total $1.14 trillion. Loans also saw a hearty increase from the year before – 9.5%, or $89 billion – to $1 trillion. Though loans may be on the rise, delinquencies retreated to 67 basis points, down from 79 a year earlier, while the net charge-off ratio saw only a one-point rise from the year before.

Net income was another reason to celebrate – up $3.1 billion (30%) from the third quarter of 2017. The net interest margin was $44 billion, or 3.1% of average assets, up from $39.5 billion (3.0%) at this time last year.

While the total number of credit unions fell by 206, membership was on the rise yet again. Credit unions have gained 4.9 million members so far in 2018, reaching a total of 115.4 million — that’s a lot of reasons to celebrate this holiday season.

DECEMBER 6, 2018
Looking Ahead to 2019
By Mark Loehrke, Editor, Financial Managers Society

Looking Ahead to 2019Deloitte is out with its annual Banking Outlook for 2019, which paints a decidedly optimistic picture for the industry heading into the New Year – provided institutions are prepared to make the changes necessary to take advantage of the new opportunities that may be coming their way. Among the more notable nuggets from this year’s report:

The U.S. banking industry as a whole finds itself on firmer ground a decade after the financial crisis, thanks in part to favorable GDP growth, tax cuts, rising rates and regulatory relief

More and more institutions are embracing the spirit of digital transformation – from creating new capabilities to modernizing legacy systems – which will be increasingly important as new fintech competitors enter the arena

The competition for qualified talent continues to heat up as well, with Deloitte recommending that institutions focus on enabling employees to work more creatively to solve problems that create new value for customers – which may mean looking outside of the industry for the talent they need

While the risk management function appears to be evolving – with institutions having made notable advances in how they assess and mitigate risk across the enterprise in recent years – current systems may be less equipped to manage emerging risks, including growing cybersecurity threats 

Even as price competition in deposits is likely to increase due to higher rates, Deloitte does not anticipate a deterioration in credit quality in 2019, although the report does note that a potential slowdown in 2020 or beyond could alter the competitive dynamics

Although banks are expected to become more active in the fintech space, either by launching stand-alone digital banks or through partnerships, Deloitte believes the importance of the traditional branch in attracting and retaining customers should remain for the foreseeable future

In addition to the above topics, the report also offers a trove of information regarding M&A trends, payments technology, the growing wealth management industry and much more.

DECEMBER 4, 2018
Getting Innovative With BSA/AML
By Mark Loehrke, Editor, Financial Managers Society

Getting Innovative with BSA/AMLThere’s something very alphabet soupy about the latest effort by regulators to encourage financial institutions to double down on their efforts with respect to their Bank Secrecy Act and anti-money laundering requirements. In short, it goes something like this:

FinCEN, OCC, FDIC, NCUA and Fed team up to promote BSA/AML innovation.

The joint statement issued by the agencies notes that private sector innovation – including new ways of using existing tools and adopting new technologies – can help identify suspicious activity and combat money laundering and terrorist financing, and encourages institutions to consider, evaluate and responsibly implement innovative approaches when and where they can. 

More than just a great Scrabble triple-word score hiding somewhere in there, the more important takeaway for banks and credit unions is the message behind the message – your examiners are going to be focusing on this, so be sure you’re doing everything you can to stay on top of it. New products and services are not the only uses for cutting-edge technology, after all.

NOVEMBER 30, 2018
Rates Reset?
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Rates Reset?Amid the recent hubbub about rates continuing to rise for the foreseeable future, Fed chair Jerome Powell walked back his previous stance, suggesting a more moderate approach to future rate hikes. This came as welcome news to many, not least of all the stock market, which immediately soared.

This doesn’t mean instant relief, however, as multiple hikes are still expected in the coming year. Powell noted that interest rates are still low by historical standards and reminded critics of the twin risks the Fed tries to balance – hiking rates too fast could shorten the current economic expansion, but keeping them too low could cause inflation.

Beyond the interest rate environment, a new report from the Fed gave banks a nice little pat on the back, noting that they’re generally well-prepared for potential upheaval in the financial system.

NOVEMBER 29, 2018
Be Prepared
By Mark Loehrke, Editor, Financial Managers Society

Be PreparedIn a recent FMS Quick Poll, we asked members what they thought the biggest story of 2019 would be for banks and credit unions. While you’ll have to wait until the January-February issue of forward to get the full results of that survey, we can let the kitty just ever so slightly out of the burlap here by reporting that more than a handful of respondents tabbed a potential recession as the headline to watch. 

They’re not the only ones, of course, reading the signs and speculating that the current nine-year economic expansion may be in its waning days as we head into the New Year. But even if the end of the line isn’t necessarily imminent, the growing buzz offers a timely reminder that now may be a good time to making sure your institution is prepared for the recession to come – whenever it ultimately comes. Here are a few ways to do just that:   

Get ahead of the economists
You’ll be two quarters behind if you wait for the official recession declaration, so keep an ear to the ground now and focus on what you’re seeing from your customers and your local economy.

Game plan a recession 
How will a recession affect your loan portfolio or your deposit base? Financial institutions already know the value of stress testing – this is where any preparations you’ve made in that vein will come in handy.

Shore up the balance sheet
While there’s certainly no need to panic at the first rumblings of a potential recession, there’s no sense in waiting until it’s too late to get the institution’s financial house in order.

Don’t be overconfident
Not only will some of your loyal customers or members likely leave during a recession (for a variety of reasons), it will probably be harder to find their replacements. That’s why now is the time to make sure your most profitable relationships are as solid as you think they are – to better increase your chances of holding onto them when the going gets tough.

NOVEMBER 28, 2018
M&A & Fintech
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

M&A & FintechIn our recent Quick Poll, we asked FMS members about their attitudes toward fintech companies, and the majority of respondents saw these new players as possible strategic allies – 80% of respondents said they saw fintech players as potential partners, while only one in three (34%) said they didn’t have plans to collaborate on a strategic initiative with a fintech partner. Now, a new report from Reed Smith and Mergermarket shows that the rest of global financial industry agrees.

The new research shows that 9 out of 10 financial institutions (94%) are planning on two or more fintech acquisitions in the next year. Almost all organizations acknowledge technology as a strategic priority, and not having a strong digital strategy puts most businesses at a competitive disadvantage – particularly in the financial sector.

Now fintech companies are looking to change the face of banking M&A. Two out of three (67%) of financial institutions surveyed said that the acquisition of technology is why they’re pursuing fintech M&A, while another 28% tabbed robo-advisory companies as their most important M&A targets. Roughly half (52%) of financial institutions felt that enhanced compliance and reporting systems were behind the rise in fintech investing and M&A, while another 46% said that they think blockchain systems will see the biggest increase in valuation over the next year. 

By any measure, then, it’s clear that fintech in all its forms will continue to change the way banking works going forward.


Mark Loehrke

Danielle Holland

Hilary Collins
Specialist, Publications and Research