Mr. Parnell, a vice president of corporate relations at People's Bank oF Connecticut for six years, recently joined Oglivy Adams & Rinehart, a public relations firm in NEVA, York, as a managing director specializing in financial institutions.
Over the past few years, investor relations practitioners in the financial industry have seen their carefully structured programs buffeted by a prolonged recession and the collapse of the real estate market.
Like victims of a natural disaster, these managers face the challenge of rebuilding their investor communications program after a storm has torn it apart.
In the banking field. this problem is especially acute. In Connecticut, 21 banks and thrifts closed in 1992.
As one might expect. the stock prices of banks and thrifts have been on a roller coaster in recent years. Between the failures, real or rumored, and a steady release of national studies and reports by unofficial rating agencies predicting more trouble for the industry, investors have voted with their investment dollars in favor of other, presumably safer. investments.
Improving profit reports in recent quarters have ameliorated the problem. Nonetheless, the situation remains fragile and investor confidence can be shaken quickly by another failure or the latest rumor.
Stigma on Banks
These marketplace factors, plus the generally poor economic conditions all businesses are now facing, make it especially challenging to drum up investor interest in an industry that is viewed as declining rather than growing.
In such a situation, investor relations officers must concern themselves with rebuilding the shareholder base, attracting new interest to the company, and timing a return to an active investor relations program. Considering the alternatives, such as inactivity and further declines in your stock price and market following, the choice is obvious.
Investor relations officers must remain active and make an effort to keep Wall Street informed of how the institution is bearing up, even during a crisis. Techniques include continuing to monitor investor mix, noting changes as they occur, and being aware of who sells off and why.
Since contacts and relationships are a cornerstone of our business, try to keep them current as well.
Also, some time spent identifying "turnaround" investors can pay off when you are ready to resume an active program. As many financial institutions emerge from their crises, investor relations professionals must be prepared to rebuild investor confidence. Following are the steps that are essential to the process.
As in any disaster, the first order of business is to determine the nature and extent of the damage. This will allow you to develop a prioritized plan of action later.
First, general market research should be undertaken to determine the state of your industry and to assess current investor interest and outlook. Questions to be asked include:
* How does your company measure up to key profit benchmarks?
* What are the experts - analysts, regulators, and industry leaders - saying about the future of the business lines your institution is involved with?
* How does your institution stack up against those perceived to be leaders?
What's the Mix?
Second, one should undertake company-specific market research to identify changes in the investor mix. For example, has the percentage of institutions versus retail holders shifted significantly? Of the institutions lost, which are likely to return and/or lead others back?
Third, along with the survey output, management's commitment is required to go forward with an active investor relations program.
This entails an honest assessment of all the internal and external factors that will support or hinder your progress. Before embarking on a program you need to determine that senior management will place a priority on this effort.
The composition of a company's shareholder base, as well as the community of sell-side and buy-side analysts following your industry, is likely to have changed materially during the long period of rough weather.
While major institutional investors (such as Fidelity) are readily identifiable and will obviously be interested in your sector, do not overlook smaller money managers who may be inclined to move quickly in response to a positive turn in the market.