What Causes Profitability?

August 12, 2014
/   Spotlight

Digital Insight proves that digital bankers actually drive increase engagement and profitability with their financial institution.

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Cause and Effect: If you build it, will they come?

/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Platform Shift in the Making

February 13, 2013
/   Insights

What does the banking industry as a whole have to do with Amazon, Microsoft and Apple? Just about nothing—and down the road, it may turn into a major problem (if it isn’t already). Consider...

Infographic: How to Spot a Fake Check

March 8, 2013
/   Insights

The team over at TROY pulled together an infographic on how to spot a fraudulent check. With more consumers using remote deposit capture to upload and deposit checks through their smartphones, it’s important to...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

Reserve Banking: The New Radical Idea

June 5, 2014
/   Insights

Banking is by nature a very conservative industry. That’s why the current buzz over ‘reserve banking’ is so interesting. Even the term seems innocuous, but the scenario it proposes is nothing short of revolutionary....

Financial Literacy Month: How are you celebrating?

March 22, 2013
/   Insights

With April approaching, it’s almost time to kick off Financial Literacy Month! Strongly supported by the United States Congress and the Financial Literacy and Education Commission, Financial Literacy Month aims to promote the importance...

Some of the most significant news in the Federal Deposit Insurance Corp.’s Quarterly Banking Profile ranks dead last in the lengthy list of news nuggets highlighted in the introduction. It has to do with bank failures.

It’s not a surprise that the subject typically ranks low in the report, since there’s plenty of good news to tout upfront. As the media will surely promote, net income rose by more than a third over the year-ago quarter, non-interest income rebounded, large-denomination deposit balances surged, loan losses improved across all loan categories and, in big picture terms, full-year earnings turned out to be the second-highest ever. For the record, it’s not all rosy—there’s been a reduction in equity capital, which can be attributed to the decline in securities value. It as economic reports go, it seems positive overall.

This is why the news of banks going under needs to be seen in context. According to the report, which analyses the last quarter of 2012, eight insured institutions failed during this period. That’s the smallest number of failures in a quarter since the second quarter of 2008.

That’s fully four and a half years ago, but it’s significant for another reason. As the Business Cycle Dating Committee of the National Bureau of Economic Research pointed out late that year, this was around the time the recession took hold.

There’s other news related to this area: The new FDIC reports states that the number of insured commercial banks and savings institutions reporting financial results actually fell from 7,181 to 7,083 and 88 institutions were merged into other banks. The number of institutions on the FDIC’s “Problem List” fell for the seventh consecutive quarter, this time from 694 to 651, and the assets in them declined from $262 billion to $233 billion

But then there’s this nugget: The year 2012 also marks the first in FDIC history in which absolutely no new reporting institutions were added.

It’s easy to attribute too much importance to a single report; three months from now the news might be very different either way. In fact, as this blog noted at the time, the FDIC report from two quarters ago fit into the narrative of ‘cautious optimism.’

As this new snapshot in time reveals, we still have reason to be cautiously optimistic. There is no question that for many different reasons—economic contraction and (hopefully) expansion, changing consumer and other market expectations, the evolving role played by technology in everything from the back end infrastructure to custom mobile applications—we’re in a time of transition, and we’re going to stay that way.

The banking industry has long been associated with gradual change, and that seems like an anachronism in a time of technology-fueled rapid upgrades and instant gratification. It’ll be interesting to see how many failures and other trends might be in the FDIC quarterly profile a year from now. Any predictions?

 

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Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp

James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.