Ouch! Banks need to transform Balance sheets

I just saw where Standard Chartered lost almost 9% in their stock value in one day and profits fell 16% year-to-year in the third quarter. Not a good day!

The Wall Street journal analyst sited three reasons, and I quote:

1. Strategy: Revenue growth has become almost nonexistent but Standard Chartered so far has made only minor moves to adjust to a world of rising costs and lower economic growth.
2. Outlook: Things will probably get worse before they get better. Exiting businesses and taking risk out of lending and trading books “will impact near term performance,” but the actions “are crucial to getting us back to a trajectory of sustainable, profitable growth,” Mr. Sands said.
3. Capital: The bank declined to give details on its capital position at the end of the third quarter, but dismissed analysts’s suggestions that it might need to raise any.

Banks can certainly slash costs to achieve profit targets, but the compelling message in this story is lack of revenue growth. What this means to me is that the same old is no longer working in banking. Non existent revenue growth! Knocking on the same corporates door to show them a slightly different version of a Supply Chain Finance program and why “We Are Better” doesn’t cut it anymore. Complaining about compressed spreads and hoping the Feds will start the rate rise so you can benefit is not taking responsible action for shareholders.

I talk to too many bankers that say things are good, growth is good, we are good, and I wonder, what do they really believe? They can’t be naive or can they? I mean one just told me today they can't even go to any Conferences because of budget cuts.  And things are good?  Perhaps they are just hoping things will get better.

My advice is to stop commoditizing what you do and focus on the places that need capital. It is hard, it will take new methods and incentives, but it is worth the effort. There are many places that need capital, starting with SMEs, infrastructure, commodities, and emerging markets.

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