After all, says Peter deSilva, CEO for UMB Bank, relationship banking never went out of style in the Midwest, even at the larger institutions.

“Not for us,” deSilva says. “We went through the crisis unscathed, and we came through it stronger than we went into it. We’re stronger financially, stronger with our relationships, and we’ve had the good fortune of picking up a lot of new clients at this time when other banks have been struggling. Now we’re reinforcing that, but it’s not really changing in any meaningful way our approach to client relationship management.”

Julius Madas, executive vice president at Intrust Bank, said it wasn’t necessarily true that relationship management was being re-engineered.

“What has occurred, and is still occurring with many banks, is substantial focus on the loan problems,” Madas said. “In such cases, banks naturally turn inward to repair damage and focus less on acquiring more customers.”

At that point, opportunities emerge not just for competing banks, but for business owners shopping around for access to credit.

“Many banks,” Madas said, “have a strategic interest in building new relationships and market share. Now is an excellent time for business owners to either really solidify a relationship or look to solve banking/financing needs for future growth.”

Marc Maun, chief executive at Bank of Kansas City, echoed that. His advice to business owners and managers? “Meet with their existing banks to review the relationship and see if there are any gaps in the services provided,” Maun counseled. “At the same time, it is appropriate to meet with other banks to learn if there are other ideas in the market. It is always beneficial to have a relationship with more than one institution to protect against changes at the company’s principal bank such as relationship managers, ownership, financial condition or service quality.”

Cost Considerations

One reason some of the nation’s larger banks are rediscovering the importance of solid customer relationships, banking authorities say, is that they engaged in short-term cost-cutting with their client relationships—with predictable results. There’s no getting around it: Investing in relationship-building requires time. It’s not inexpensive.

But the investment that banks make in building relationships has a decided payoff, said Scott Coup, who recently joined Enterprise Bank & Trust as a senior vice president for relationship management.

“Relationship banking is not about sprinting; it’s a marathon,” Coup said. “It takes longer to develop a relationship with a business, just like with a personal relationship.” But, he noted, part of the payoff is with the mistakes you don’t make in dealing with a client. “I don’t think you can ever know too much about a business,” Coup said.

That, Maun said, is in part why Bank of Kansas City embraces a team approach to working with clients, ensuring each one of broad access to the bank.

“That depth also assures people at the bank know the customer’s business well,” he said, but “the cost of acquiring a relationship can be substantial.” The bank’s goal, therefore, was to maintain each relationship for a long time.

“If we do our job,” Maun said, “our business will grow along with our custo-mer’s business.”

That long-term approach to relationships is vital, deSilva said.

“We have tried hard to keep the people in the process; we work very diligently to make sure clients know their loan officers and executives,” he said. “We try not to change them around, to put the same face in front of that same customer, year after year.

“Every time we lose an associate, we have to re-enroll the customer,” de Silva said. “When there’s a new face, the customer gets suspicious: ‘What’s going on? Why did they leave?’ So we spend time on our internal sales forces, so clients understand that we’re stable, that they see the same face, and that it’s somebody who knows their business and can help guide them if things get difficult.”

Going forward, Madas suggested, business owners are likely to see more opportunities to reassess their banking relationships, because more changes are coming in that sector.

“Most likely, additional bank failures or acquisitions due to weaknesses of the acquired bank will occur for the next couple of years in our region,” Madas said. “Many banks, based on FDIC-published Call Reports, continue to have big challenges in key metrics. The economy and real estate prices will not recover quickly enough for immediate improvement.”

Given that, Schroeder said, customers conducting such reappraisals need to keep several things in mind.

“The question coming out of the banking crisis is, given the failures of big banks, where their shortcomings were obvious and visible, is there something inherent about large banks vs. small bank that’s better or worse going forward, now that we have been through the crisis?” she said. “You hear those questions articulated. But our analysis supports the conclusion that community banks held up though the crisis, in terms of their lending, so that kind of relationship banking model may still be a viable and legitimate banking model.”

But, she noted, “larger banks operate very differently than small banks on any number of counts. They are different kinds of institutions. You have large banks with a very sharp retail focus, or large banks with a more focused wholesale strategy. There may be an advantage to working with a large lender who may have more capital for the financing you need.”

“I don’t think you can categorically say one model is good or better than the other,” Schroeder said.

 

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