Nearly nine in 10 community bank chief executives say that developing new sources of revenue is crucial to their banks' success, but less than one-fourth are confident in their ability to do so, a survey found.
Most also recognize the importance of attracting new business customers, but roughly half said that is easier said than done. Related Link
John Ziegelbauer, Grant Thornton's national managing partner for financial, said that developing fee-income sources is outside many community bankers' "comfort zone."
But with net interest margins at 17-year lows, he said, "people are realizing fee income is important and there are different ways to do it." Most community bankers seem more interested in generating fee income through traditional loan and deposit services, however. Only 39% said that they see offering services such as insurance, brokerage, and real estate services as essential to their success.
Large banks have generally had more success developing fee-income products, and more and more community bankers regard big banks as serious competitive threats.
Other community banks remain small banks' chief competitors, but 68% of the bankers surveyed said that they view regional or megabanks as sources of competition, up from 54% in Grant Thornton's 2003 survey.
They are less concerned about mutual fund companies, brokerage firms, and insurance companies than they were a few years ago but view Internet banks and Wal-Mart Stores Inc. as threats.
Thirty-four percent cited Internet banks as a source of competition, up from 8% in the 2003 survey, and 70% said Wal-Mart's expansion into financial services beyond those it already operates would be a threat to their banks' business.
New to the survey this year was a section on technology spending. Eighty-percent of the 355 bankers said that "enhancing technology to improve productivity" is essential to success, and 70% said they planned to spend more on technology.
The bankers appear more open to the idea of taking their companies public.
Twelve percent of CEOs of privately held banks said that they were considering public offerings; none said so in last year's survey.
Mr. Ziegelbauer attributed the shift to recent signs that the Securities and Exchange Commission was open to giving smaller companies more flexibility in complying with a provision in the Sarbanes-Oxley Act that many small banks had felt was particularly onerous.
"There were a lot of questions about Sarbanes-Oxley last year — questions about if going public was the right thing to do," he said. "Progress on that front has changed people's outlook."
A complete copy of the survey is available at
