7 Rules when bankers face the bear – gonzobanker

Rule 2 – Develop your Plan B strategy with a skunk works team. While it’s not time to panic, smart leaders need to form a small working group to analyze strategic options if this year’s earnings forecast starts to go south. Yes – these scenarios must include divestments, reductions in force and delayed strategic initiatives. While it’s distracting to come clean with the entire team on these contingencies, it’s critical to have a trusted group thinking through options and ready to pounce if conditions worsen.

Rule 3 – Demand benchmarks and profitability analysis in every resource discussion. The growth cycle is over in banking … period.

Leaders will need to stare down some of their brightest and busiest managers and request more data to justify resources and prove that business lines and products are indeed contributing to the bottom line. There is no time for perfect profitability systems. This is about quickly building performance benchmarks and profitability analyses that meet the 90% accuracy rule.

Rule 4 – Embrace the agility buzzword and avoid gutting future strategic investments. Downturns are always the Petri dish for the next great banking franchises. As earnings pressures mount, bankers must avoid the temptation to slash marketing, training, IT and recruitment budgets. Any bank that cuts off its progress toward digital sales and client experience is asking to be a future acquisition candidate. Instead, banks must hone their focus on small, cumulative projects that have near-term benefits but fit into a long-term investment agenda. The word “agile” is overused, but it’s a meaningful way to describe identifying minimal project requirements in areas like analytics, CRM, IT and talent management that can have tangible value in the next 12 months.

Rule 5 – Take it to the streets to meet your customers and prospects. The very best medicine during tough times is to be knee-deep in gritty discussions with customers. The knowledge to be gained is worth its weight in gold. Banks CEOs should demand that every relationship manager and support team member is out with customers and not hiding back at HQ. Importantly, top management must also create ways to aggregate this market intelligence and build more granular action plans when the macro forces of growth weaken. GonzoBankers dig deep for ways to grow in a downturn.

Rule 6 – Make your operating culture all about radical candor. Now is not the time for cushy “all is well” messages from the C-suite. Today’s bankers are too battle-worn and smart for that drivel. Instead, CEOs need to regularly provide an honest perspective on how industry challenges are impacting performance and priorities inside the organization, whether that’s a weekly email, departmental town halls or personal video clips. The best CEOs will be the most real and accessible to their teams. Don’t hold back – your team CAN handle the truth.

Rule 7 – Quietly prepare for bargain hunting to drive future shareholder value. The beginning of the downturn may create a pause in M&A activity as buyers are less willing to pay premiums for other banks and sellers have concerns about their acquirors’ stock currency after the deal closes. However, when the recession levee finally breaks, smart banks will be ready to go bargain hunting for assets, deposits and fintech intellectual property at much cheaper multiples. While it’s early in the cycle, CEOs should be thinking about ways to effectively deploy capital when fear strikes the broader market and the selloff has peaked.

Stock sage Benjamin Graham once aptly concluded, “ The intelligent investor is a realist who sells to optimists and buys from pessimists.” Bankers are stuck right now in a psychosis between optimism and pessimism. It’s time to fight against a “wait and see” attitude and literally grab the emerging bear by the claws. GonzoBankers need to be vigilant about how 2019 unfolds and jump on corrections and execution opportunities. It’s time to go hunt the bear.