Big banks said adios to more than 60,000 employees as plummeting profits and uncertain economic conditions forced many institutions to make tough calls. The Financial Times has calculated that just 20 of the largest banks in the world have terminated at least 61,905 jobs in 2023, making it one of the worst years for such reductions in the sector since the 2008 financial crisis saw more than 140,000 jobs on the chopping block. As the banking sector wrestles with high costs weighing on profit margins, they have become less concerned about retaining financial talent and more concerned with survival. Banks disclose total headcount numbers every quarter and while the aggregate figures mask the actual hiring and firing going on beneath the surface, they are informative.
Some of the deepest reductions have been at Wells Fargo where job cuts came after the bank announced a strategic shift away from the mortgage business early in the year. And even though the bank implemented cuts totaling over 50,000 employees in the past thirty-six months as part of the bank’s cost-cutting plan, the firm isn’t done shrinking that headcount. Bank executives said Friday there are “very few parts of the company” that will be spared from more employees being discharged.
Banks Making Fewer Business Loans Due to Recession Fears
Along with layoffs. commercial banks have been trimming their business loans over the course of 2023. According to Forbes Magazine, the drop off is consistent with the leveling off of total loans of all kinds made this year. And the economic fears that are driving the change, on the part of both lenders and borrowers, are important. Since February 2023, commercial and industrial loans held by commercial banks have declined $33 billion, Some bankers have pointed their fingers at falling deposits as the culprit. “How can we make loans when we don’t have deposits?” they ask. And they have a point…since February 2023 total bank deposits have fallen $313 billion, which is nearly two percent.
Take for example Industry Bancshares. Featured in a recent Wall Street Journal article, Industry Bancshares is the parent company of six banks with some $5 billion in assets and more than two dozen branches scattered across stretches of farmland and ranches in eastern Texas. It is one of those typical “small banks” in rural America whose local focus has long been relationship banking. Historically, such small bank customers know their bank and officers. They, and their neighbors, are loyal customers and say they simply keep their money “down the street”. Doak Hartley, the CEO of Industry Bancshares, usually can’t go to a local restaurant, grocery store or even church in town without being noticed as their old friend. Now however, the chairman gets stopped by customers constantly asking about how to get a loan or where the economy might be headed.
Commercial Finance Consultants: Take Advantage of This Bleak News
For Commercial Finance Consultants (CFCs) now is the time to capitalize on the economic opportunities presented. For brokers and consultants with well-established lender networks, the challenges faced by small local banks can indeed be viewed as a fertile ground for opportunity, growth and expansion. When the broader financial landscape suggests an impending recession, it becomes imperative for professionals to:
- Offer Expertise on the Economy. Content is Your Friend: No matter how you define it, banking is in trouble. Content is king. Double down on your website’s blog and make certain you post informative articles at least once a week. Always additionally post those articles on LinkedIn.
- Focus on Your List Building Efforts: Now is the the time to work over-time and focus, focus, focus on your list building efforts and especially those business owners you consider “local”. If needed, purchase industry lists form list brokers and “fill your bathtub”. You WILL need at least one direct mail stuffer with multiple cover letters.
- Reach Out to Your Local Bankers: While more and more banks will be turning down loans, you can rest assured they DO NOT want to risk losing customers and their deposits. When a lending officer is forced to decline a loan application, make certain they feel comfortable recommended you as an alternative. You should be r4eaching out and connecting to all of your local community lenders on LinkedIn.
- Strengthen Local Face-to-Face Networking Opportunities: Leveraging strong local professional network becomes crucial during challenging economic times. Consultants should actively engage with local business owners and attend after hours meet-ups, relevant seminars, and collaborate with other professionals. Expand you local networks and uncover new opportunities.
- Build, Build, Build Your Agent Networks: As professional commercial finance consultants, you will spend virtually 100% of your marketing and business development time locally, or at least within your city. That does not mean you turn your back on other small communities. All CFC’s will build networks of part-time referrers and agents. There are lesson after lesson, after lesson on how to build this powerful lead generator. If fact, in this economy, you have tens of thousand of bank employees now seeking employment opportunities.
While economic downturns present challenges for small local banks, they also create significant opportunities for Commercial Finance Consultants. By leveraging their expertise, networking capabilities, and strategic insights, consultants can play a pivotal role in helping banks navigate through uncertainties, capitalize on emerging opportunities, and achieve sustainable growth.